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Kremlin.ru
June 19, 2015
Plenary session of the 19th St Petersburg International Economic Forum. (and Charlie Rose interview)

Vladimir Putin took part in the plenary session of the 19th St Petersburg International Economic Forum. The session's motto was Time to Act: Joint Efforts for Stability and Growth.

Speech at the Plenary session of the St Petersburg International Economic Forum

President of Russia Vladimir Putin: Good afternoon, ladies and gentlemen, friends,

It is a pleasure to welcome you all to this International Economic Forum in St Petersburg, a city which throughout its history has always been a symbol of Russia's openness and desire to draw on the best of world practice, cooperate, and move forward together.

First of all, I would like to thank all of the politicians and businesspeople attending this forum for their interest and confidence in our country. Ladies and gentlemen, friends, we see in you serious long-term partners, and it is for this reason that, as is tradition, we always speak with frankness and trust at the St Petersburg Forum about our achievements and new possibilities, and also, of course, about the problems and difficulties we encounter, and the tasks we are still working on.

I saw many of you here a year ago. Over this last year, the global and Russian economies have changed, and in some areas, these changes have been very dramatic. Russia's economy now faces restricted access to the global capital market, and then there is the drop in prices for our main export goods, and the small decrease in consumer demand, which had previously been an impetus for economic growth. True - here, I agree with the participants in the yesterday's discussions at the forum - demand is starting to recover again now.

Looking at energy prices, on which our economy is still very dependent, unfortunately, I remind you that the average price for Urals brand oil in 2013 was $107.9 a barrel. In 2014, it dropped to $97.6 and over January-May this year, was at $56 a barrel. According to Rosstat [Russian Statistics Agency], Russia's GDP contracted by 2.2 percent in the first quarter of 2015 compared to the same period in 2014, and industrial output was down by 1.5 percent over January-April 2015.

What I want to note, however, is that by the end of last year, as you know very well, people were predicting that we were in for a very deep crisis. This has not happened. We have stabilised the situation, absorbed the negative short-term fluctuations, and are now making our way forward confidently through this difficult patch. We can do this above all because our economy had already built up sufficient reserves to give it the inner solidity it needs. We still have a positive trade balance and our non-raw materials exports are increasing.

Let me give a few examples to illustrate these words. Physical volumes of non-raw materials exports increased by 17 percent over the first quarter of 2015, and exports of high value-added goods came to nearly $7 billion in the first quarter, which is up by nearly 6 percent in value terms and by 15 percent in terms of the physical volumes.

We have kept inflation under control. Yes, it did spike following the ruble's devaluation, but this trend then slackened off. We saw prices go up quite sharply over the first three months of the year (by 3.9 percent in January, 2.2 percent in February, and 1.2 percent in March), but in April, inflation rose by only 0.5 percent. That the trend is decreasing now is clear. We can see this.

Our budget is stable. Our financial and banking systems have adapted to the new conditions and we have succeeded in stabilising the exchange rate and holding on to our reserves. Let me stress too that we did not resort to any restrictions on the free movement of capital, just as was the case in 2008 and 2009.

The federal budget deficit in January-May 2015 came to 1.48 trillion rubles, which represents 3.6 percent of our GDP. We expect that the deficit will reach 3.7 percent of GDP for the year as a whole. This is in line with the budget law currently in force.

Our gold and currency reserves, which I just mentioned, come to more than $300 billion. I was speaking with Elvira Nabiullina [Governor of the Central Bank] just before, and, according to my information, our reserves came to $361.6 billion as of June 5. They are very slightly lower now, because some money has been used.

At the same time, the Government Reserve Fund came to $76.25 billion or 5.5 percent of our GDP as at June 1, 2015. Our second reserve fund, the National Welfare Fund, had reserves of $75.86 billion, again, 5.5 percent of GDP.

We have prevented a jump in unemployment, which currently stands at 5.8 percent of the active population. I remind you that during the 2008-2009 crisis, the unemployment rate rose to 8.3 percent. The imposition of sanctions forced us to considerably step up our import replacement efforts. We have made significant progress in a number of areas and have achieved some notable results. We have tremendous potential in our engineering and petrochemicals sectors, in light industry, the processing sector, pharmaceuticals, and a number of other sectors. Our agriculture sector's results are a clear example of what we can achieve.

Of course, we still have a lot of work to do in this sector too, but our dairy production, for example, was up by 3.6 percent over January-April 2015, compared to the same period in 2014. Production of butter increased by 8.7 percent, cheese by slightly more than 29 percent, fish and fish products by 6 percent, and meat by 12-13 percent. The import replacement programme's aim is not to close our market and isolate ourselves from the global economy. We need to learn how to produce quality, competitive goods that will be in demand not just here in Russia, but on the global markets too. Ultimately, our goal is to make fuller and more effective use of our internal resources to resolve our development tasks.

Let me repeat the point that we are responding to the restrictions imposed from outside not by closing off our economy, but by expanding freedom and making Russia more open. This is not a slogan; this is the substance of our actual policies and of the work that we are doing today to improve the business environment, find new partners, open up new markets, and take part in big integration projects. I note that more than 60 companies with foreign participation have started up practical operations in Russia over just this last year alone. Right now, while this forum is taking place, several companies are opening their doors, including here in St Petersburg. There is a pharmaceuticals company, a company producing gas turbines as a joint venture with foreign partners, and so on.

I want to thank all of our partners who, despite the current political problems, continue to work in Russia, invest their capital and technology, and establish new businesses and create new jobs here. Friends, thank you very much.

Ladies and gentlemen,

The timely measures that we took to support our economy and financial system have worked overall. Now, we are once again concentrating our focus on resolving the systemic tasks on our long-term development agenda. Our task is to ensure sustainable growth, make our economy more effective, raise labour productivity, and bring in new investment. Our priorities are to improve the business climate, train the specialists we need for the economy and public administration, and education and technology. I would like to say a few more words about each of these issues.

Let me start with improving the business climate and making Russia's jurisdiction more competitive. Our aim is to offer the freest and most predictable and favourable conditions and opportunities for investors. We want to make it profitable to invest in Russia. We set the firm goal for the coming four years of settling tax rates that will remain stable and not increasing the tax burden on business so that companies can plan their work for the medium term.

We will stick to these decisions no matter what the external situation or the burden on our budget. You can see from the figures I cited just before that our reserves are sufficient for us to be able to carry out these policies. At the same time, we are creating new incentives for new developing companies. In this respect, let me remind you that we decided to introduce tax holidays for individual entrepreneurs, offer small and medium-sized business special tax regimes that significantly reduce their tax burdens, and give tax breaks to greenfield industrial companies.

Yesterday, I discussed with the heads of our industrial companies a number of issues that we most certainly do face. The proposal was made to offer tax breaks of this kind not just to greenfield projects, but to all new investment. We will certainly examine these proposals. Let me add, that capital and assets returning to Russia from abroad are also exempted from tax payments, and their owners are fully guaranteed from any kind of prosecution.

At the same time, we will take steps to make Russian companies and their offices abroad more transparent. We have already made the necessary amendments to our laws. Let me stress that these provisions are fully in keeping with the decisions made by the G20, FATF and other international organisations.

Furthermore, as part of our national entrepreneurial initiative, we have thoroughly updated the federal laws regulating conditions for doing business. The authorities and the regulatory and supervisory agencies are changing their approach to working with businesspeople. It is becoming more comprehensible, open and transparent. Let me note that starting in 2016, small businesses that have never had any serious violations of the rules in the past will be freed from inspections for a three-year period.

We realise, of course, that for our national jurisdiction to be competitive, we need to keep moving ahead and make constant improvements. At the same time, we also need to analyse the effectiveness of the measures we have already taken. This makes it particularly important to have effective channels for getting feedback from business. I therefore ask the Agency for Strategic Initiatives and the main business associations to analyse how the laws are enforced and study the best practice around the world, and if need be, propose new decisions.

The national regional investment climate rating also has a very big part to play. The rating is not a goal in itself of course, but will provide a working instrument for identifying and spreading best practice in the regions to the country as a whole. Incidentally, the initiative to develop this rating came from our main business associations. What distinguishes this project is that the businesspeople themselves assess the state of the business climate, the quality of public administration and so on.

More than 200,000 businesspeople throughout Russia have taken part in the surveys this year. Some of the positive examples have already been mentioned during the discussions here, but I would like to take the opportunity to name them once again. I think this is worth it. They include Kaluga Region, Tatarstan, Belgorod Region, Tambov Region, Ulyanovsk Region, Krasnodar Territory, Rostov Region, Kostroma Region, Republic of Chuvashia, and Tula Region. As I said, this rating will be a tool for helping to improve the quality of management at all levels of power. This is one of the key areas for our development today.

In this regard, the first point I want to make is that we need to develop a whole class of public administrators who know how to work flexibly, take a modern approach, and understand business' needs when it comes to the business climate and the public administration system overall. A mechanism for ongoing improvement of public management personnel will be one of the most important steps in work in this area. We also plan to establish a centre for exchanging best practice in public administration and developing the business climate in the regions at one of our top universities. This centre will be a good platform not just for improving qualifications, but also for exchanging experience, coming up with new ideas, and developing horizontal ties between the members of different regional management teams.

Second, I think it would be a good idea to set up special headquarters - project offices, if you will - in each region. They will become a kind of managing office for development, helping to introduce the best mechanisms for creating a favourable investment climate. A comfortable business environment is one of the essential conditions for developing a mass of small and medium-sized businesses working in the non-raw materials sectors. This is a real road forward to economic diversification and job creation.

Our goal is for small and medium-sized businesses to conquer the domestic market and develop their export potential. We will therefore develop close coordination between the institutions for supporting industry and stimulating exports. They include the recently set up Industrial Development Fund, the Far East Development Fund, the Russian Direct Investment Fund, project financing mechanisms, and also the Russian Export Centre, where Russian companies can receive a whole range of services to support their goods on markets abroad.

Also, following a proposal from the business community, we are setting up a corporation to develop small and medium-sized business. Businesses will be able to obtain all of the necessary financial, legal and methodological support, including help in getting access to public procurement tenders and tenders by state-owned enterprises. Essentially, we are consolidating the support mechanisms for small and medium-sized business and we hope that this will bring us real results.

Friends, anyone who wants to take the lead in the world today has to put their focus on leaders in business, management, and, of course, developing technology and education. We have done a lot to strengthen our country's scientific and technology resource base, bolster cooperation between the scientific community, the education sector, and industry, and get new developments into practical implementation in actual production.

Over the near future, we will undertake an extensive technological upgrading of our companies in the raw materials and non-raw materials sectors and in agriculture. From 2019, a new technical regulation system and strict environmental standards will encourage gradual transition to the best available technology. Essentially, companies will be required by law to modernise and carry out ongoing technological development. One of our most important tasks today is to give our companies incentives to invest in developing technology here in Russia. I ask the Government to propose additional decisions in this area.

We also need to make an inventory of the current mechanisms for supporting applied research and getting new developments into practical use. We need to look at how the incentives, including tax breaks, are working. As for the development institutions, they need to focus clearly on facilitating our technological modernisation efforts.

We are launching projects that will provide our companies with a powerful technological resource base not just for today but also for tomorrow. Our technological planning horizons are broadening substantially. Russian companies must take key positions in sectors and markets that will shape the economic future and the way of life of people in 20-30 years' time, like the way the IT sector has dramatically changed our own lives over these last 20 years.

To achieve these goals, we have launched the national technology initiative, with the participation of prominent scientists and the high-tech business sector. This is a long-term project, of course, but within the next 2-3 years, we should already have new scientific laboratories, new companies, and educational programmes for training personnel able to handle the most modern tasks and work with the latest technology.

There is another very important area I want to mention. At the recent congress held by Delovaya Rossiya, one of our biggest business associations, the idea came up of organising an effective system for foreign technology transfers. We have successful experience of foreign technology transfers in the pharmaceuticals, automotive, and consumer goods manufacturing industries. It is important to give this work a systemic basis and get the development institutions' resources involved. I ask the Government and the business associations to draft specific additional proposals on this matter, including on establishing the optimum format for cooperation between the authorities and business in the area of technology transfers.

We realise, of course, that the quality of our education system will play a decisive part in developing our country and making it more competitive. Our colleagues from foreign investment companies, who I met with yesterday, said the same thing. Training for specialists must prepare them not only for today's demands but also take into account the best global practice and the development prospects for new technology and markets.

Our young people, students and schoolchildren, have won the most prestigious competitions in technical and scientific fields. To give just one very recent example, students from St Petersburg National Research University of Information Technologies, Mechanics and Optics have proven repeatedly that they are unrivalled in the world today. This year, the university's team once again confirmed its absolute leadership and was a long way ahead of the world's top programming schools. The university's team is the only team in the world to have won the student programming championships six times. I want to congratulate the team once again on this success.

A lot depends, of course, on the heads of the universities. We need new leaders here, people with deep knowledge of production, people who know industry's needs and follow the technological development trends. Our companies propose that we build up a reserve of management personnel for universities training our engineering and technical specialists. I think this is a good proposal and we should carry it out. At the same time, the business community should be more active in universities' supervisory boards and boards of trustees and should work closely with teaching staff and take part in their training and ongoing education programmes. This is in business' own interests.

Modernising and improving the quality of secondary vocational education and giving it stronger links to actual production are very important tasks. Many regions are already actively implementing with success a programme of dual education that combines time spent in actual companies with theoretical training. It is no coincidence that the regions that have made the greatest progress in developing their secondary vocational education systems are also the leaders in the regional rating and overall are demonstrating rapid socioeconomic growth.

The engineering professions and the trades require very high levels of skills today. This requires us to develop a modern system of professional standards. The employers and business associations are also playing a big part in this work through the Presidential National Council for Skills and Qualifications.

I think we need to summarise our experience, combine our efforts and build an integral system for training personnel, taking the best world practice into consideration. This system should cover every link, from additional education opportunities for developing children's skills in technical fields, to secondary vocational education, higher education in engineering, and national and international competitions for the various trades.

Another important areas of our work for the coming years is developing mechanisms for accompanying and supporting talented children so as to help them develop their potential in full and achieve success here at home, in Russia. As you know, we are launching one such project. It is underway now in Sochi. This is the Sochi centre for children from throughout the country who show exceptional talent in sport, the arts, and science. This will be another important part of the Sochi Olympic legacy.

The global economic development map is changing literally before our eyes. Asia-Pacific Region nations such as China, Japan, South Korea and ASEAN nations already account for one quarter of the global economy. Over the next decade, it is these markets that will become the primary source of growth in global demand for goods and services. With all the fluctuations occurring in the world - political and economic - this trend is inevitable. It makes sense that together with our Eurasian Economic Union partners, we strive to improve ties with the APR, eliminating barriers to trade and investment. This year, the Eurasian Economic Union signed its first free-trade zone agreement with Vietnam. Russian companies will be able to supply a whole range of goods duty free.

We are broadening our cooperation with the People's Republic of China in the interest of creating a common economic space. This May, we signed a joint statement on combining the development of the Eurasian Economic Union and the Silk Road Economic Belt. In essence, we are talking about new approaches to cooperation between the Eurasian Economic Union and China, about broadening cooperation and implementing major joint infrastructure projects, about simplifying trade, and strengthening cooperation through various financial instruments.

Strengthening partnership with APR states is a highly important element of our work to develop Russia's Far East. We are creating the most free and comfortable conditions possible for placing capital and launching production. Investors will get unique opportunities to work on the Russian market and, importantly, a good base for direct access to the broad, growing APR market. Even now, priority development areas are being created in the Far East with a whole range of tax and other benefits.

We are launching a system of state support for major investment projects. At the same time, we are prepared to offer even more flexible and advanced mechanisms. The Government has already prepared a draft law on creating a free port in Vladivostok. The draft law applies to all key ports in Primorye, from Zarubino to Nakhodka, and 13 districts that are home to about 75% of the territory's residents.

Free port residents will receive ample benefits. These are not just tax benefits, but also a simplified visa regime, the implementation of a free customs zone, and simplified border control procedures. This September, the first Eastern Economic Forum will be held in Vladivostok, which will include a detailed presentation of our proposals to foreign investors.

I want to repeat again that we strive to cooperate with everyone - everyone who is ready to work on the basis of equality and mutual respect, and wants to implement mutually beneficial projects. I am confident that the trade and economic partnership with Latin American nations and BRICS states also holds enormous potential. The BRICS summit coming up in early July in Russia will certainly contribute to broadening our business contacts.

I want to stress that active cooperation with the new centres of global growth does not in any way mean that we intend to give less attention to the dialogue with our traditional western partners. I am confident that this cooperation will certainly continue.

Ladies and gentlemen, Russia is open to the world, to economic, scientific and humanitarian cooperation, and contacts with civil society and business representatives from around the world. I am confident that this policy, this dialogue, is in our common interest and it will help maintain the trust that serves as the foundation for our work together.

We face major challenges and we will develop, enter new markets, create modern technology, and implement large-scale projects. We will do it together with entrepreneurs, citizens and new leaders who are ready to work for Russia and for its development. That is why we are absolutely sure of our success.

Thank you for your attention.

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American television talk show host and journalist Charlie Rose: We will have an in-depth discussion on a number of economic issues that were raised with our business representatives.

Mr President, I would like to begin by saying that it is a pleasure to be here in your home city, the place where you began your political career. This is also a historically important city - Russia was born here as an empire. This is a very important place.

There are some very serious issues that can be resolved only if Russia takes action, if you take part. We are talking about economic policy, foreign policy, Ukraine, the Baltic states, Europe, Syria, Iran, China, and Russia. There are very many questions, there are problems, and there are conflicts. Russia has to play its part in finding solutions to many problems. There is the issue of borders, the issue of Russia and Ukraine. Could you help us understand as you see it: where are we? How did we get there and where do we go from here?

Vladimir Putin: First, I would like to thank you for agreeing to work with us today and moderate this meeting. This forum is called the St Petersburg International Economic Forum. I would like us to focus on economic issues. However, I would agree with you that without resolving a number of acute critical situations it is hard to move along in the economic sphere.

We have discussed the developments in Ukraine on numerous occasions, and I understand that this is unavoidable. However, you know, we either keep talking about Ukraine all the time, or a few years ago we were talking about the crisis, say, in Iraq and some other countries. We keep talking about things that already happened, but we never discuss why they happened. And if you do want to talk about this and it does seem important, I would prefer to begin with precisely that.

Why did we arrive at the crisis in Ukraine? I am convinced that after the so-called bipolar system ceased to exist, after the Soviet Union was gone from the political map of the world, some of our partners in the west, including and primarily the United States, of course, were in a state of euphoria of sorts. Instead of developing good neighbourly relations and partnerships, they began to develop the new geopolitical space that they thought was unoccupied. This, for instance, is what caused the North Atlantic block, NATO, to go east, along with many other developments.

I have been thinking a lot about why this is happening and eventually came to the conclusion that some of our partners seem to have gotten the illusion that the world order that was created after World War II, with such a global centre as the Soviet Union, does not exist anymore, that a vacuum of sorts has developed that needs to be filled quickly. I think such an approach is a mistake. This is how we got Iraq, and we know that even today there are people in the United States who think that mistakes were made in Iraq. Many admit that there were mistakes in Iraq, and nevertheless they repeat it all in Libya. Now they got to Ukraine.

We did not bring about the crisis in Ukraine. There was no need to support, as I have said many times, the anti-state, anti-constitutional takeover that eventually led to a sharp resistance on the territory of Ukraine, to a civil war in fact.

Where do we go from here? I would not like to get too deep into the subject here. Today we primarily need to comply with all the agreements reached in Minsk, the capital of Belarus. I would like to reiterate that we would never have signed this document if there had been anything we were not satisfied with. Now that it happened and we signed it, we will work to achieve its full implementation.

At the same time, I would like to draw your attention and the attention of all our partners to the fact that we cannot do it unilaterally. We keep hearing the same thing, repeated like a mantra - that Russia should influence the southeast of Ukraine. We are. However, it is impossible to resolve the problem through our influence on the southeast alone. There has to be influence on the current official authorities in Kiev, which is something we cannot do. This is a road our western partners have to take - those in Europe and America. Let us work together.

Charlie Rose: What do you want from the Kiev Government, what should they do?

Vladimir Putin: We do not want anything. The people of Ukraine should want the Ukrainian government to do something, or not to do.

We believe that to resolve the situation we need to implement the Minsk agreements, as I said. The elements of a political settlement are key here. There are several.

The first one is constitutional reform, and the Minsk agreements say clearly: to provide autonomy or, as they say decentralisation of power, let it be decentralisation. This is quite clear, our European partners, France and Germany have spelt it out and we are quite satisfied with it, just as the representatives of Donbass are. This is one component.

The second thing that has to be done - the law passed earlier on the special status of these territories - Lugansk and Donetsk, the unrecognised republics, should be enacted. It was passed, but still not acted upon. This requires a resolution of the Supreme Rada - the Ukrainian Parliament, which is also covered in the Minsk agreements.

Our friends in Kiev have formally complied with this decision, but simultaneously with the passing by the Rada of the resolution to enact the law they amended the law itself - article 10, I believe, which practically renders the action null and void. This is a mere manipulation, and they have to move from manipulations to real action.

The third thing is a law on amnesty. It is impossible to have a political dialogue with people who are threatened with criminal persecution. And finally, they need to pass a law on municipal elections on these territories and to have the elections themselves. All this is spelled out in the Minsk agreements, this is something I would like to draw your attention to, and all this should be done with the agreement of Donetsk and Lugansk.

Unfortunately, we still see no direct dialogue, only some signs of it, but too much time has passed after the Minsk agreements were signed. I repeat, it is important now to have a direct dialogue between Lugansk, Donetsk and Kiev - this is missing. Finally, they have to begin the economic recovery of these territories, of course.

I would like to repeat something I have already said many times: the excuse that 'we do not have the money' does not work here. If the current authorities in Kiev believe that this is Ukrainian territory inhabited by Ukrainian citizens who have the right to receive, say, disability benefits or the pensions that they earned under the existing Ukrainian law, the Kiev authorities cannot refuse to pay, they simply have no right to do so. They are violating their own constitution. All this has to be done, and not in words, but in practice.

Charlie Rose: As you may know, the United States of America believe that you are arming the separatists, you encourage them, you engage the Russian Armed Forces to fuel the conflict. There is strong concern that this could lead to a new cold war.

Vladimir Putin: You know, it is not local conflicts that cause a cold war, but global decisions - like the withdrawal of the United States from the antimissile defence treaty. This is a step that pushes us all towards a new spiral in the arms race because it changes the global security system.

As for regional conflicts, the conflicting sides seem to always - and I stress, always find weapons. This is true of eastern Ukraine as well.

I would like to say that if this situation is resolved by political means, no weapons will be necessary, but it does require goodwill and a desire to enter into direct dialogue, and we will assist in this. What we cannot do and would never agree to is for someone somewhere, anywhere, to proceed from a position of force, first using the police (they call it militia there), then special services, and then the armed forces.

Before the army units and the so-called battalions - armed nationalist units - appeared on those territories, there were no weapons there; and there still would have been none had they tried to resolve the situation by peaceful means right from the start. Weapons appeared there only after they started killing people using tanks, artillery, multiple launch rocket systems and aviation. That gave rise to resistance. Once an attempt is made to resolve the issue by political means, the weapons will be gone.

Charlie Rose: What are the acceptable borders for Ukraine, for Russia? What borders do you find acceptable?

Vladimir Putin: What do you mean when you speak of borders: geographical borders, political borders?

Charlie Rose: Political borders.

Vladimir Putin: Regarding cooperation, we have always said and continue to say - there is nothing new here - that with all the current difficulties, I have always thought that Russians and Ukrainians are one people, one ethnic group, at least; each with their own peculiarities and cultural characteristics, but with a common history, a common culture and common spiritual roots. Whatever happens, in the long run Russia and Ukraine are doomed to a common future.

We have proceeded right from the start from the idea that Ukraine has the right to make its own choice - civilizational, political, economic or any other. It is no secret - we all know that Russia actually initiated the disintegration of the Soviet Union and providing sovereignty to all these countries. Nothing has changed since then. However, apart from the ties I mentioned earlier, ones that took shape over decades, very specific things in the present hold Russia and Ukraine together: we have a common engineering infrastructure, a common energy infrastructure, a common transportation infrastructure, common regulations and so on and so forth. We are held together by the ability to speak the same language. Now, this has to do with Russia and our interests.

We have always proceeded from the notion that we will resolve everything, even disputes, by means of negotiations - and it is only natural for neighbours to have disputes. However, if some third parties get involved in these negotiations, we expect them to take our interests into account as well, rather than simply offer us a choice. If you are asking what we expect in the political sense - we expect a comprehensive, trust-based and equal dialogue.

Charlie Rose: I would like to get back to Ukraine, but let us talk about Russia's relations with a whole number of countries, including the United States and China. Characterise the relationship with the United States: what's wrong with it? What's right with it? What does it need?

Vladimir Putin: In other words, where we have some positive developments and where we have problems.

I will begin with the problems. The problem is that we are being forced to accept other's standards and solutions without consideration for our understanding of our own interests. We are actually being told that the United States knows best what we need. Let us decide what our interests and needs are ourselves, proceeding from our own history and culture.

Charlie Rose: How exactly is the United States trying to decide what you need?

Vladimir Putin: By interfering in our internal political processes, including by means of funding the non-public sector, by imposing international security decisions.

For instance, I already mentioned the issue we came across first - Iraq, and this immediately cooled off our relations. Do you remember the statement 'If you are not with us, you are against us'? Do you call this dialogue? This is an ultimatum. You should not use ultimatums when talking to us.

Now over to the things that unite us - these do exist. We are united by the desire to eventually combat common threats, including terrorism, the expansion of drug threat and a very dangerous tendency towards the proliferation of weapons of mass destruction. There are also issues of humanitarian interaction, like combatting severe infections that hit entire regions of the world. There are issues dealing with the global economy, and this has to do with the sector that we have a direct significant influence on - energy. There are also other spheres where we are cooperating quite successfully and I expect that this would serve as the basis that would make it possible for us to restore our previous relations with the United States and move on.

As for the People's Republic of China, the level, nature and confidence of our relations have probably reached an unprecedented level in their entire history. For 40 years - I would like everyone to hear this - for 40 years we have been negotiating border issues. We found compromises and solutions; we met each other halfway and closed the issue. 40 years! We have not managed to resolve these issues with all countries. Besides, we are developing economic ties, we are actively cooperating within international organisations and the United Nations Organisation.

We are creating new unions that are developing quite actively and are becoming attractive to many other countries: this is the Shanghai Cooperation Organisation, for instance. It was initially created to resolve border issues after the disintegration of the Soviet Union, but it then developed and now it is an organisation that other countries would like to join. Most probably at the coming summit in Ufa (our next summit is in Bashkiria) we will decide to accept India and Pakistan. We are also developing other forms of cooperation - BRICS, for instance.

In my address, I spoke of the integration of our efforts within the Eurasian Economic Union and the Silk Route Economic Belt. In other words, we are developing our relations in this area too. China is our major trade and economic partner. Our relations are developing very effectively.

Charlie Rose: Some say this is a natural relationship because China has the cash and Russia has natural resources, so there is a natural affinity right there.

Vladimir Putin: You should read what American analysts write. I am sure you do and are only pretending not to. American analysts, politologists and economists say the United States is also turning towards China. China is a growing economy. If anyone has any concern over a decrease in their growth rates, the First Deputy Chairman of the State Council of China said that 7 percent is the highest economic growth in the world in any case.

Not only Russia. Why? The whole world is looking at Asia, and Europe is also looking for opportunities to develop relations, while for us this does come naturally - we are neighbours and this is a natural affinity. Besides, there are certain values that we jointly uphold on the international arena quite successfully, like equal access to resolving key international issues.

Charlie Rose: Is it a more natural affinity than Europe and the United States? Is China more in the future a place that Russia feels more comfortable with than Europe or the United States? And could that lead to some anti-western alliance?

Vladimir Putin: Anti-western?

Charlie Rose: Anti-western, anti-American.

Vladimir Putin: There is no country, including China, against which we or China, as far as I understand China's policy, would build our policy. We do not form alliances 'against', we build alliances in favour of things - in favour of implementing our national interests.

I would like to stress: you are expanding the North Atlantic bloc, NATO. The Soviet Union no longer exists, while the bloc was set up to counterbalance the Soviet Union. The Soviet Union is gone, the Warsaw Treaty is gone, while NATO not only exists, it is expanding. You are doing it, while China and we are not creating any blocs, we do not have a bloc mentality, we are trying - and successfully, it seems - we are trying to think globally, not only sharing responsibility, but also trying to find mutually acceptable solutions and compromise. We never proceed from the position of force. We always search for solutions, solutions within the process of negotiations.

Charlie Rose: We have read much about you and your country; there are three things that I constantly see. One is a sense of warning to be respected, another is to have an equal conversation, a third is a sense, perhaps in your history, a great concern about borders and having a buffer zone for Russia. Am I accurate in that?

Vladimir Putin: You know, I hear this all the time: Russia wants to be respected. Don't you? Who does not? Who wants to be humiliated? It is a strange question. As if this is some exclusive right - Russia demands respect. Does anyone like to be neglected? It is actually not about respect or the absence thereof - we want to ensure our interests without in any way harming our partners. However, we are counting on a constructive, direct and substantive dialogue. When we see an absence of dialogue or an absence of desire to talk to us, this naturally causes a certain response.

I will tell you an interesting story that has to do with the so-called eastern partnership that our colleagues in Western Europe are promoting. This idea, incidentally, is actively supported in the United States as well. Our first reaction to the idea of an eastern partnership was quite positive. Why? Because we proceeded from the notion that Russia and the East European countries are held together by a thousand ties, including economic ones. These are common technical regulations, as I said, common infrastructures and so on. Therefore, we proceeded from the idea that if Europe started working with them, pulling them in in some way, this would inevitably lead to some constructive interaction with Russia. And we would work together. We would argue over some things, agree on others, but we would be arriving at some common solutions that would allow us to build a new economic and, eventually, humanitarian and political space.

Unfortunately, none of this ever happened. How did the crisis in Ukraine that you began with occur: Ukraine was offered to sign the association agreement. Wonderful. However, everyone knows that Ukraine is a member of the free trade zone within the CIS (which Ukraine, actually, wanted to get established). This zone offers lots of preferences and benefits.

It took us 17 years to negotiate the terms of our accession to the WTO. Now, in one move, they decided to enter the customs territory of the Russian Federation through Ukraine. Is that the way things should be done? And when we suggested holding consultations, we were told it was none of our business. Is that the way issues should be resolved, specifically where Russia is concerned?

What has trust got to do with it? This is not about trust - it is about having our interests taken into consideration.

Charlie Rose: Let me talk about a couple of places where there is a dramatic need for cooperation between the United States and Russia. One is Iran and the nuclear negotiations and the P5+1. Do you think there will be an agreement? And what kind of agreement do you want to see?

Vladimir Putin: First, I want to stress what I see as the essential point here, namely that we have a common understanding with all participants in this process, including the United States and European countries, and Iran itself, I hope, on the fact that we all categorically oppose the spread of weapons of mass destruction. This is our position of principle and it is this that enables us to work constructively with the United States in this area.

We are very pleased to see that the Iranians have also changed their position considerably, which has made it possible to reach the agreements we have today. We most certainly support these agreements. The only thing that I think would be counterproductive would be to deliberately undermine the agreements by putting demands on Iran that it cannot fulfil and that are not relevant to the main issue - the issue of non-proliferation. I hope, though, that things will not reach this point and we will sign the agreement soon. I think that [Foreign Minister] Sergei Lavrov knows better than me when it will be signed.

Sergei Lavrov: When it is ready.

Vladimir Putin: I ask, "When can we sign it?", and he says, "When it is ready."

Our diplomats always talk this way. (Laughter)

I think the signing will take place soon. I met yesterday with the Director General of the IAEA, and what is most important of all here is that after the signing, the process of executing these agreements must begin, and this will take approximately six months.

Just as important though, is for your country, the United States, to take a positive attitude towards these agreements and give them your support, to secure Congress' support. We know the discussions currently taking place in the United States, and we know that the President has the power to sign these agreements himself, meaning they do not need to be ratified. This is not our affair and we cannot decide it. There are issues we cannot decide for the authorities in Kiev, and there are matters we cannot decide for the authorities in Washington. The ball is therefore in your court. But we hope that the US President will achieve a result that will most certainly go down as one of the biggest foreign policy achievements of his presidency.

Charlie Rose: But do you believe that this agreement will go ahead, given what Mr Lavrov just said?

Vladimir Putin: I do, and we are working towards this. We think it is absolutely essential to defuse the situation. It is equally important, though, for all of the regional powers to have the assurance that they will not end up confronting a worsening situation in the region or face threats. This is the situation we absolutely have to avoid. I stress that Russia seeks to develop good-neighbourly and friendly relations with Iran and with all the countries in this region.

Charlie Rose: I have another foreign policy question before we turn to the economy and the issues a number of speakers raised.

Syria is another matter very much on our minds today. Do you see any solution to the current situation? Russia supports Bashar al-Assad's government and has done so for many years. Iran also supports Assad's government. It seems as though the pendulum is swinging this way and that. What possible solution do you see? How can we end this terrible civil war that has created millions of refugees? When can we find a solution?

Vladimir Putin: The sooner, the better. Let me repeat that our position on this issue is based on the fear that Syria could descend into the same kind of situation as what we see in Libya or in Iraq.

You know, after all, that before the state authorities and Saddam Hussein himself were destroyed, there were no terrorists in Iraq. Let's not forget this. People prefer not to talk about this today, but is it really so hard to see who created the conditions for terrorism to flare up in these places? After Iraq was invaded, the old authorities were all sent fleeing or were destroyed, and Saddam was hanged. And then we ended up with the Islamic State.

Look at what is happening in Libya. It has ceased to exist as a state and is in the process of total disintegration. Even US diplomats have suffered losses there. We know the tragic events that took place there. The main issue, as we see it, is that we do not want to see Syria take this same road. This is our main motivation for supporting President Assad and his government. We think this is the right position. It would be difficult to expect us to take any other line. Moreover, I think that many would agree with our position on this issue.

I mentioned Iraq several times. We know what is going on there. The United States supports Iraq, supports, arms and trains the Iraqi army. In two or three attacks, the Islamic State captured so many weapons, more than the Iraqi army probably even has. This includes armoured vehicles and missiles, though the general public is poorly informed about all of this. This was all just recently. The Islamic State is now better armed than the Iraqi army. And this has all happened with the United States' support.

The United States supposedly withdrew from Iraq, but our special services and the information we receive from Iraq itself indicate that thousands of US service personnel are still in Iraq. The results are deplorable and tragic.

We do not want all of this to repeat itself in Syria. We call on our partners in the United States and Europe, but above all in the United States, of course, to make greater efforts to fight this absolute evil that is fundamentalism, the Islamic State and similar groups that essentially all have their roots in the well-known global terrorist organisations that have already launched repeated attacks against the United States itself. Our call is for political settlement, which should, of course, guarantee the regime's transformation, and we are ready to discuss this matter with President Assad too.

The UN just recently declared the importance of working together with President Assad to fight the Islamic State and other terrorist groups. We are ready to work with the [Syrian] President to ensure that the political transformation process can go ahead so that all people in Syria feel that they have access to the instruments of power, and in order to put an end to this armed confrontation. But we cannot achieve this from outside and through the use of force. This is the real issue.

Charlie Rose: All right, but are you ready to call on President Assad to step down if this would make an alternative political solution possible or would help to fight the Islamic State, say?

Vladimir Putin: Our moderator is a real American. I said, "without outside intervention", and he asks me if we are "to call on President Assad to step down?" Only the Syrian people can do this. How can we ignore such basic things as this? As I just said, we are ready to engage in dialogue with President Assad about carrying out political reforms together with the healthy opposition forces. I think this is constructive and realistic.

CharlieRose: Mr President, let's come back to the economy. I have many questions. Here, we have Ronny Chichung Chan of Hang Lung Properties investment company, Mahmood Hashim Al-Kooheji, general director of Bahrain Mumtalakat Holding Company, and also president of YPF Argentina, Miguel Galuccio, with whom we will talk about energy. We all heard a lot about China here today. What opportunities do you see for building more profitable cooperation between China and Russia?

President of Investment Company Hang Lung Properties Ronny Chan: As the President [Vladimir Putin] said, I think the economy is the key area for cooperation between China and Russia. As a businessman, I think that Russia and China are a match made in heaven. Russia is rich in natural resources, whereas China lacks natural resources but is growing fast. China has capital for buying natural resources. From an economic point of view, it would be hard to find two countries that complement each other better.

The only remark I want to make is that I am sure that President Putin has a strategic vision for Russia's relations with China, but Mr President, I am not so sure about your business community. I am not so sure that your businesspeople are ready to make use of the advantages the Chinese market offers. Just take a look around. How many Chinese are there here in the audience? I feel quite alone here on the stage. How many Russians are there in China? I don't even know. Talking to my Russian friends about all of this over the last couple of days, I came to the conclusion that people here still see Asia as a place they would like to get hold of, but they are not ready to go and commit themselves economically there.

President Putin said just now that China is one of the world's big economic powers today. Mr President, I would like the business leaders present here today to show more readiness to engage in practical work with us. You mentioned financing, for example, which is essential for many Russian projects. Many companies are registered in Hong Kong, because the Hong Kong market is linked to the Shanghai market, and will soon be linked to the Shenzhen market too. The Shanghai stock exchange is the fifth-biggest in the world, the Hong Kong exchange is in sixth place, and Shenzhen is number eight. If we combine these three exchanges, we get the second biggest securities market in the world. Why not have Russian companies register in Hong Kong? This would help them in their work with China. I think this would be an excellent opportunity, Mr President.

Vladimir Putin: I agree with my colleague that we need to give Russian-Chinese economic relations concrete substance and projects. I think too that we need to do this not just in big business, but also develop ties at the level of small and medium-sized businesses, so as to weave a natural and living fabric for working together in all different production sectors.

In terms of individual countries, though, China is our number one trading partner. Our bilateral trade comes to $85 billion. Yesterday, I spoke about this with the First Vice Premier [Zhang Gaoli], and I discuss it regularly with President Xi Jinping. I think that over the coming years, we could take our trade to a figure of $200 billion.

All of what you said just now is absolutely correct. We must proceed without haste, of course, take things carefully and ensure all the necessary conditions. This goes for both us and our Chinese partners. I said in my opening remarks that we do not place any restrictions on free movement of capital. Even during the difficult crisis of 2008 and 2009, and last year too, we did not restrict capital exports in any way. But we hope that our partners will offer the same conditions. The yuan is becoming an increasingly stronger regional currency. We all see that this is happening. But experts know that there is not enough free movement of capital. If steps in this direction go ahead, this will be major progress towards liberalising our relations.

We understand very well that our Chinese partners also have to take a cautious approach, and they are the better judges of what measures they should take. The decision to carry out payments for our trade operations in our national currencies - the yuan and the ruble - is already a big step towards deepening and expanding our relations. The first yuan-ruble trading took place just recently, and we are sure that this will continue and develop, and will create new opportunities for work in the real sector of the economy.

Overall, I agree with you. We need to keep moving in this direction and we shouldn't focus just on agreements at the government level and just on decisions made by the sovereign funds and so on. Of course, this is all important, too, and creates a platform for broader format work. We are working on this and we will continue in this direction.

Thank you.

To be continued.

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 #3
Russia Insider
www.russia-insider.com
June 19, 2015
Bloomberg's Coverage of St. Petersburg Econ Forum Was Embarrassing. Here Are the Highlights
When one of the commentators described Tsipras' speech to the forum as akin to "diplomatic terrorism" it was pretty clear what viewers were in for
By Danielle Ryan
Danielle Ryan is an Irish journalist and blogger. She has a degree in Business and German from Trinity College Dublin and studied political reporting at the Washington Center for Politics and Journalism in Washington, DC. Special interests: American politics and foreign policy, US-Russia relations and media bias. Her blog can be found at journalitico.com.

Bloomberg commentators: St. Petersburg forum was a "sad freakshow".

I have just spent far too much of my day watching Bloomberg's coverage of the St. Petersburg International Economic Forum, so this will be brief.

I could go through it all in detail and analyse it more deeply, but quite frankly, it was actually so mortifyingly bad that it doesn't deserve to be taken quite that seriously. If anyone else out there had their TVs or computer screens tuned to Bloomberg, please know I feel your pain.

Over the course of the event, Bloomberg had at least five (maybe six) different commentators, anchors and reporters 'debating' and 'analysing' (and I use those terms loosely) the comments made by Vladimir Putin, Alexis Tsipras and others. First their speeches, and then the interview with Putin conducted by PBS's Charlie Rose.

When one of the commentators described Tsipras' speech to the forum as akin to "diplomatic terrorism" it was pretty clear what viewers were in for.

So, without further ado, here's just a flavor of what I subjected myself to this afternoon:

Putin receives applause from the St. Petersburg audience, Bloomberg responds by arguing that the applause gave the event a "Soviet feeling" ...(Question: what kind of 'feeling' do we attribute to events where Obama receives applause from supportive Americans?)

There is an element of theater to all politics, but there's "a larger element of theater" with Putin. Why? Because there's a difference between "what is said publicly and what is really going on" ...(Question: I wonder if Bloomberg has heard of this guy called Obama, or?)

Putin says Russia not interested in being seen as a 'superpower' ...Bloomberg commentator immediately responds: "Russia likes to see itself as a superpower". (Question: What the fuck?)

Putin (personally) has seen his "influence and territory" decrease over the last 24 years. (Dear Bloomberg, meet history book.)

Putin is possibly preparing to continue his "Westward march" into Europe. Seriously.

One commentator speculates that he may want to go 'as far as Kiev'.

One commentator disagrees, because, as he sees it, "the bear has been caged".

Crimea (just in general) is "dilapidated"

The St. Petersburg forum was just a "sad freakshow" with "one guy from Germany"

"This [Russia] is not a place where you want to invest"

And last, but certainly not least:

"The only thing Putin is missing is his eyepatch."

Arr, mateys! Come aboard the sinking ship that is Russia!

Okay. It's easier to laugh this off than to take it seriously, because if you took it seriously, you might just decide life would be better lived curled up under a rock where geopolitics doesn't matter.

The reality: Charlie Rose conducted a wide-ranging, serious, 70-minute long interview with Putin and this is all Bloomberg could come up with in response. It's juvenile.

Bloomberg's coverage can't be taken seriously, because they refuse to take their subject matter seriously and debate it in the way it deserves to be debated; with nuance, and by adults. Not squealing children who see the world in black and white.

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 #4
PBS Newshour
June 19, 2015
Charlie Rose on how Vladimir Putin sees the world

Charlie Rose interviewed Russian President Vladimir Putin today at the St. Petersburg International Economic Forum. Judy Woodruff talks to him about Russia's role in the Ukraine conflict, Russian-American relations, and the enigma that is Vladimir Putin.

JUDY WOODRUFF: Russia's President Vladimir Putin today blamed NATO ambitions to expand and the United States for fanning the flames of conflict in Ukraine. He did that at an international economic conference held in St. Petersburg.

Part of the program featured an interview with Putin by PBS' own Charlie Rose.

Seated in front of an audience of businesspeople, political leaders and journalists, the Russian president blamed the West for the conflict in Ukraine.

CHARLIE ROSE, Host, "The Charlie Rose Show": Help us understand, as you see it, where are we, how did we get there, and where do we go from here?

VLADIMIR PUTIN, Russian President (through translator): Why is there a crisis in Ukraine?

I was quite confident after the bipolar system went into oblivion and after the collapse of the Soviet Union, certain Western partners of ours, particularly the United States, were in a kind of euphoria, and instead of trying to create a new situation, good neighborly partner relations, they started to explore new free geopolitical spaces - well, free in their view. And that is why we are witnessing the expansion of NATO eastwards.

JUDY WOODRUFF: I spoke to Charlie Rose immediately following his question-and-answer session with President Putin.

Charlie, you pressed him about what he thinks Ukraine needs to do defuse the situation. What did he say?

CHARLIE ROSE: Well, he said they need to talk the people - that the people in Kiev need to talk to the separatists.

I mean, that has been - it's not a new idea from him. He has always said that, that they need to have real conversations between the separatists and - I think he obviously feels some affinity. And I raised the question, were they helping the situation by supplying arms to the separatists, by in some cases engagement of Russian soldiers and other weapons - I mean, other connections that Russia has to this?

And I think Vladimir Putin, because of all of his experiences, has a real fear about being - about NATO being on his borders. He's always had that. They had that with respect to Georgia and with respect to Ukraine. I think he probably worries that if a government in Ukraine was leaning East, it might - I mean leaning to the West - it might one more time entertain the idea of NATO membership, which he really, really - that's the probably the thing that he dislikes the most.

I think the headline from this, he really believes that the United States and Russia should be talking, that they ought to be having a dialogue about Ukraine and other issues.

JUDY WOODRUFF: And what did he say about that? You asked him about the increasing tension in the relationship between the West and Russia. What did he say about that?

CHARLIE ROSE: Most of his animus is towards the government in Kiev.

As you know, in previous times, he has said that he thinks that the demonstration that overthrew the president of Ukraine who fled to Russia was a - sponsored in part by the United States and the West, the U.S. CIA.

I think that most people believe that Russia, because of its - it has regained some of its military strength. And they do rattle the saber a bit. It wants to be a player. They want to be respected, which I raised with him. And he in a sense said, well, we are respected. Everybody wants to be respected.

But there is deep within him the sense that, after the collapse in '91, that Russia wants to regain its status as a big-time player in the world.

JUDY WOODRUFF: Would you say that being respected or not being respected is a new concern, is a new posture on his part?

CHARLIE ROSE: The fact that he did say it the way he did suggests that he thinks about it. And I think that pride for him and for other people, I mean, you know, Russia was a superpower. And then, with the collapse of the Soviet Union, all of a sudden, they were not a superpower.

In fact, their economy was in terrible shape, and they had a whole range of cataclysmic changes in their economy, and state ownership and all kinds of oligarchs came forward. And Russia has been trying to recapture some of its global presence.

He cares about borders, he cares about respect, and he cares about conversations. He wants to be talked to. He wants to be considered a primary player.

JUDY WOODRUFF: Charlie Rose, talking to us from St. Petersburg, the site of this economic summit, Charlie, thank you, and travel safely.

CHARLIE ROSE: Thank you, Judy.

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 #5
Financial Times
June 21, 2015
Senior Putin aide warns over Russia-US relations
Kathrin Hille in St Petersburg and Sam Jones in Warsaw

One of Vladimir Putin's most senior officials has warned the US against a plan to store heavy weapons in eastern Europe as Nato draws up contingency plans for conflict in Europe for the first time since the cold war.

Sergei Ivanov, the Russian president's chief of staff and a former leading figure in the KGB successor FSB, told the FT that deteriorating relations with the US - where "rhetoric has started to go off-scale" - and any drastic move by Nato close to Russia's borders meant it would concentrate its focus on external threats.

"If the military infrastructure of Nato is greatly strengthened in eastern Europe, or the US starts to really place potent missile defence systems in Romania, Bulgaria or Poland, we will say that the external threat has grown stronger," Mr Ivanov said in an interview. "I am telling you that honestly in advance. Not everything depends on us, it also depends on you."

His comments come as Nato this week prepares to grant significant new powers to the alliance's military chief to deploy troops, a move that currently requires a decision from all 28 Nato allies. Nato is also looking at ways to improve logistics across Europe, for example by striking agreements to use civilian railway companies and having the ability to close down roads and motorways or take over airports.

Officials at the alliance said the new measures were purely defensive but they wanted to speed up Nato's response to crises. This includes detailed logistical and tactical questions about how Nato would transport thousands of troops, tanks and material to battlefields - issues the alliance has not had to address on its home soil since the cold war.

"We are discussing decision making and we have to find a way to reconcile military efficiency with political control," Nato secretary-general Jens Stoltenberg told the FT.

Mr Ivanov is one of the longest-serving officials in Mr Putin's administration and has been the president's close associate since their days in the KGB in the late seventies in their home town of St Petersburg.

'In Russia, I don't see a crisis'

A former security council head and defence minister, Mr Ivanov gave cautious praise to recent efforts to revive dialogue between Moscow and Washington, but he revealed deep concern over what he described as a hegemonic, interventionist US.

"That [US secretary of state John] Kerry came to Sochi and met with both the president and foreign minister Lavrov and held long, detailed talks with them in a friendly, normal atmosphere, that's of course good, " Mr Ivanov said. But he added that he viewed such initiatives with caution: "It is naive to think about strengthening relations until the conflict in Ukraine is settled."

He said the US appeared to have understood that the situation in Ukraine was getting out of control. Following Mr Kerry's visit, Washington has started to become more involved in the diplomacy around the fragile Minsk II ceasefire in agreement.

The president's chief of staff was speaking amid political debate in Moscow over how Mr Putin should use the sky-high public support generated by last year's annexation of Crimea and his push to restore Russia's position as a global power.

Alexei Kudrin, a former finance minister who remains a trusted economic adviser to the president, on Thursday proposed that Mr Putin call early presidential elections to get a strong mandate for economic reforms. A person close to Mr Kudrin said he was keen to replace Dmitry Medvedev as prime minister, but would do so only if he were given a free hand from Mr Putin to implement structural reforms.

Mr Kudrin's offensive is the most aggressive attempt yet by the economic reformers' camp to wrest back some influence and to move the political agenda away from sabre-rattling and towards the economy.

In a sign of how fiercely the siloviki bloc is likely to be opposed to early presidential elections, Mr Ivanov dismissed the proposal out of hand, saying he did "not see any sense" in the idea. "Do we have a terrible crisis in our country, a pre-revolutionary situation? Yes, there are economic problems, but such exist in the European Union as well, as they do in the UK, " Mr Ivanov said.

"I am really looking forward to the [planned] referendum [on the UK's EU membership] by the way, I am really curious how that will end. I am also curious how the Greece-eurozone crisis will end - we will not have to wait much longer. But in Russia, I don't see a crisis."
--
Ivanov's path to the top

Jan 31, 1953 Born in Leningrad,
now St Petersburg.
1975 Graduated from St Petersburg State University, studied English and Swedish.
From 1976 Worked at the KGB's Leningrad region directorate where he met Vladimir Putin.
1984 Second secretary at the Soviet embassy in Helsinki, working under the top KGB official there.
1998 Appointed Mr Putin's deputy, then head of the FSB, the successor to the KGB.
1999 National security adviser to president Boris Yeltsin
2001 Named minister of defence.
2007 First deputy prime minister.
2011 Chief of staff of the presidential administration.

 #6
Financial Times
June 21, 2015
Transcript: Interview with Sergei Ivanov

Financial Times: Let us begin with domestic politics. Former deputy prime minister and former finance minister Alexei Kudrin has proposed to hold the 2018 presidential elections early to give the president a strong mandate for reform from now. Has there been any discussion of this either with Mr Kudrin or inside the administration?

Sergei Ivanov: The most simple and natural answer is that you need to ask someone else. I could say "go and ask Vladimir Putin whether he is preparing for early elections." That would be the most natural. But I understand that you expect an answer from me. I'll tell you frankly, we have never discussed this question.

Unlike holding the parliamentary elections [scheduled for December 2016] early, I don't see any sense in holding the presidential elections early. Do we have a terrible crisis in our country, a pre-revolutionary situation? Yes, there are economic problems, but such exist in the European Union as well, as they do in the UK. I am really looking forward to the [planned] referendum [on the UK's EU membership] by the way, I am really curious how that will end. I am also curious how the Greece-Eurozone crisis will end - we will not have to wait much longer. But in Russia, I don't see a crisis.

Early parliamentary elections are still just an idea, [but] holding them two months earlier than usual does make sense. First, the new Duma will then adopt the new budget and bear some responsibility for it. If the Duma itself hadn't raised this question about early elections, then the current Duma would resign in November [2016] after having adopted the budget and not taking any responsibility for it, and the new Duma would come in and say: we didn't adopt this. There is a logic to it. And early Duma elections would save money. If we combine all elections in the country - municipal, regional and gubernatorial - with the Duma elections, we will save several billion roubles. And that also makes pragmatic sense.

But I don't see any basis for comparing early parliamentary elections with the presidential ones, these two have nothing in common. I'm afraid that's all. I just don't see any sense in early presidential elections, I don't see it.

Under the constitution, you know that since our President has been elected for a first term, he, Vladimir Putin, has the full right, if he so decides, to stand as a candidate in the next presidential election in 2018. I just say that to explain our constitution and the law. That's all I have to say about this.

FT: In your opinion, does the president think about the possibility of another term?

SI: Thinking privately is always possible and probably necessary. Once you reach the age of reason, thinking is always very useful. But again, I have not discussed this with the president. There is a Russian proverb: 'There are more important things' to discuss. But I think, knowing Vladimir Vladimirovich well enough, that if he stands again, he will not announce that this year. Why would he? There are others, like [opposition Yabloko party leader Grigory] Yavlinsky has already announced that he will run, and maybe there will be more. But in my opinion, this is a false start, to be honest.

FT: Before the sanctions were imposed, there were already structural problems in the Russian economy. These problems are all still there. How can you do true structural reforms?

SI: First of all, you are right that Russia needs structural reforms and needed them already long before the sanctions were announced. I completely agree with you. Today, if you were at the plenary session, you heard the president's speech. He just listed what needs to be done for an acceleration of structural reforms: Improve public administration, improve the business climate...I don't want to repeat everything, because all that was all broadcast. I'm just naming a few. Human resources, investment, diversification of the economy and import substitution. For the west, that is a very unusual term, but for us it plays a very important role.

Now about the sanctions. Yes, the sanctions indeed did a certain damage, we have never denied that. I mean economic damage. As the most painful I would single out the decline in real incomes of the population and, as a consequence, the fall in consumer demand.

Then there is the devaluation of the rouble and oil prices. On oil prices, people have different views. Several of our economists emphasise the drop in budget revenues due to the fall in the oil price. I don't entirely agree with that. In general, there are two points of view on mineral resources. One says that Russia's richness in mineral resources, primarily oil, is a blessing for Russia. There is a different point of view, to which I subscribe, that mineral resources wealth and in particular high oil prices, is not a blessing but a curse for Russia. That's what I think.

I'll tell you why. In the 2000s, when we had very high oil prices, the motivation for carrying out structural reforms and diversify the economy was not very high. Why should you do that, when a golden rain is pouring down on you? That is true everywhere in the world, by the way, not just in Russia.

But now, I believe, with the oil price somewhere above US$60 per barrel and the rouble around 55 to the dollar, that is an ideal ratio and it is time to engage in structural reforms right now. That is my point of view, and I don't claim a thorough economic knowledge, I have a completely different profession as you probably know. But nonetheless, I worked in the government for ten years before I moved to the presidential administration, and in those ten years I learnt a lot.

Let me say something else. I do not agree on everything by far with Kudrin, by far. But I think that he was right when he, during his time in government, set up the Reserve Fund and the National Wellbeing Fund.

The National Wellbeing Fund is not a thrift box and not a safety cushion. This is money which is being provided, as a loan, exactly for the diversification of the economy. Primarily infrastructure - airports, roads - the things without which there can be no economic development by definition. If some region has no good airport or good roads, then the goods produced there can simply not be transported out.

For Europe, including the UK, it is very difficult to understand the situation Russia is in. You all live in one timezone, thank God, but we have 11. Here governance systems can't possibly be blindly copied from British, Belgian, Dutch or even German ones, because we have completely different sizes and completely different regions and climatic conditions.

We have frost, as you well know. But still, we have competitive strengths, and that is not just mineral resources, that's also well-educated people, human resources. We still have engineering resources, we have very talented engineers, we have very good IT people.

FT: You emphasised the huge territorial size of the Russian Federation. There is a theory that it is not necessary to develop the territory beyond the Urals the way it was done in the USSR, that the cities have grown too big, and that this way of development is not economically viable given the harsh climate. How should Russia adjust its development strategies to that?

SI: First of all, there is a myth that Russia, out of disappointment over the direction relations with its European partners are taking, is now turning its back on them and only looks East. This is a myth, it is not like that. Even after all sanctions and counter-sanctions, the European Union remains our leading trade partner. And I am convinced that it will remain so for decades to come. I have no doubt. What you call pivot to the east, Russia started that at least five to seven years ago, when we did not have any sanctions yet and our relations were good. We did that not because we are against someone or because we want to annoy someone or take revenge. Life itself and the global economy clearly show that the market of the 21st century lies not in Europe but in Asia-Pacific. And that was not invented by us and doesn't depend on us, that's just a fact of life.

Therefore, as there are growing, promising markets, we must react to that if we want to remain competitive, and so we started to forcibly develop the Russian far east. That is concerning our pivot to the east.

Now regarding the other aspect which you mentioned. The Soviet Union indeed mastered indeed not the east, but the north. They built really big cities, like Norilsk for example or Dudinka on the Northern Sea Route. Economically that was, of course, lossmaking. Therefore some of the same companies that are now building a huge project in Yamal, like Surgutneftegaz, have gone to Eastern Siberia, where there are terrible climatic conditions. They don't build cities there anymore, but work in shifts. They bring workers there for two to three months and then fly them out again. That is a lot cheaper economically and does not harm the environment.

By the way, just to return to that topic for a second, their access to the system of lending and refinancing, to the western financial markets has been almost completely closed, and many kinds of modern equipment are now under embargo. But today President Putin said, that in reality sanctions, especially such embargoes, still worked somehow in the times of the USSR but can't work anymore today. Any equipment, believe me due to my primary profession, can easily be bought through third countries. Yes, that will be a bit more expensive. Yes, that will be askew. But it is do-able. You can't stop it. And, by the way, Iran proved that - although Iran's economy can't be compared with Russia's. It is not possible.

And then sanctions are a double-edged sword. They hit not only those on whom they are imposed but also those who impose them. Did you see the latest data from the Austrian Institute of Economic Research, which calculated how much our countersanctions are hurting the European Union? I can tell you. Only the EU - the direct financial losses from the countersanctions amount to €100bn and 200,000 jobs. I know Europe well, I lived there for a long time, I mean the countries of the eurozone. 200,000 jobs - that is palpable. Unemployment is already high enough, and then the influx of refugees that you are facing - that is an explosive mix. I can only sympathise. But of course it's not up to us to solve this problem.

FT: Looking at Siberia and the Far East, which regions should be a priority? The Chinese are very interested in investing in agricultural land.

SI: That is true. But let's start from the fact that not just the Chinese are showing strong interest in investing in the Russian agricultural sector, but even the Americans and the Europeans want this very much. This is not a joke. I am a member of the Supervisory Board of the Russian Direct Investment Fund. Late yesterday [June 18] night, the president met with the shareholders of the biggest private investment funds in the world. Collectively those who sat around that table have US$5trn under management - they don't talk about this, but we know.

In the last 13 years, foreign direct investment in Russia - I don't want to overload you with statistics, but this number is revealing - grew 13 times. Not by 13 per cent, but 13 times in 13 years. That proves that Russia is a very promising market for investment and a target for investment.

Now, regarding the Chinese in the Far East. First, China is our neighbour. I believe that Russia's border with China is one of the longest borders in the world. It is natural for us to have close ties with China, and we don't reject Chinese investment, including in agriculture. It is another question, however, under which rules that happens and what obligations the two parties have.

Our population in the Far East is scarce, we don't have enough population. Sometimes people put forward some ideas. In the tsarist era, those willing to move to the Far East were paid the travel expenses. We have now again started to distribute land to those who want it. Go and take hectares of land, completely free land. Other instruments include financial support. Primarily, of course, these are economic instruments - special economic zones.

Which regions? It's clear that this includes Primorsky Krai, because it is the most comfortable in terms of the climate. The Amur Oblast, Khabarovsk Krai. Anyway, I think every region of the Far East and Eastern Siberia have their niche and their advantages. Of course it is not very promising to engage in agriculture in Yakutia because of the climate, but there are other things there. There is, for example, solar energy, there is huge mining. Yakutia is a storeroom of oil metals and oils which exist in the world, Yakutia has it all, a very rich Krai.

But it is not just the production and sale of raw materials. What I would like is processing, the creation of products with value added and only then the sale for export. We should not just hunt for raw materials but something made from them. Then there will also be structural changes in the economy.

At the supervisory board of the Russian Direct Investment Fund we decided yesterday (June 18) morning on the establishment of the world's largest petrochemical complex, which Sibur will build with Russian and foreign financing.

That just proves my thesis: processed gases, plastic films or packaging materials cost a lot more than the raw material, and producing them makes economic sense.

FT: You mentioned that when it comes to Chinese investment in the Far East, it was important which rules apply.

SI: Let me correct myself. We do not intend to impose any concrete special rules for Chinese investors. The rules must be the same for all. It doesn't matter who it is - the Chinese, Koreans, Japanese, English, Americans - the rules, I'm convinced, must be the same. Whether some are interested and others aren't, that's already another question, but the same rules must apply to everyone.

FT: Why did you mention the question of population in the Far East?

SI: There is a labour shortage there. The rules are there. Let me explain. For example we have a ban on foreign investment in a narrow strip of border zone. And that rule will certainly be respected. If a Chinese investor wants to it's 200km from the border, and a Chinese investor wants to cultivate virgin land 200km from the border and grow vegetables there - so do it for God's sake. Those vegetables will be bought by the few of our citizens who live there, and the rest can be sent back to China. The Northeastern provinces of China are now spending a lot of money on logistics, and if they gain access from there to the ports of Primorsky Krai, then the logistics will be a lot cheaper and more efficient. And we will make money on the transit - that, which doesn't exist now. That is also a healthy economic idea. Why not go for that? I don't see any reason.

FT: We spoke a lot about Asia, let's talk about the west. I'm especially interested in hearing about relations with the US. We saw that Kerry met with President Putin not long ago. It seems to me that there might be a slight revival in the dialogue between Russia and the US. Is that correct?

SI: Kathrin, I always view foreign policy initiatives with caution. That Kerry came to Sochi and met with both the president and foreign minister Lavrov and held long, detailed talks with them in a friendly, normal atmosphere, that's of course good. It is good because for the last year, Russian-American relations seriously soured. To be frank, there are practically no channels for interaction left. Many mechanisms created earlier simply ceased to exist. In the period of the reset, if you remember, there were big commissions, we met regularly on different issues - the economy, humanitarian issues, human rights, security, anything. And that has almost all disappeared from sight.

Well, the reason - I'm not inclined to blame anyone for anything, it happened because it happened. And from that perspective, the fact of Kerry's visit, it seems to me, is positive.

Moreover, it seems to me that the Americans themselves have understood that the situation in Ukraine is getting out of control, I tell you openly. It is simply getting out of control. Why it started there and how it started there in Ukraine, I won't talk to you about that and sermonise, but we have a solid view about how all that started and why it started. What the purpose of doing and supporting all this, we still don't understand until this moment.

If I'm absolutely frank, we don't understand why they hanged Saddam Hussein at the time and what the purpose was of everything that happened afterwards. Hussein was not an ideal ruler, you may think of him whatever you like, and he probably doesn't deserve the best epithets. But you have to admit the obvious, that during his time, there were no terrorists in Iraq. He hated them and annihilated them, he hung them and shot them, that's the truth. It's also true that there were no chemical weapons there, at least not that I know of. And what do we have now in Iraq? Libya? They bombed Libya, killed Gaddafi, and what now - has it gotten better?

First they bombed Libya, and now they are asking rhetorical questions in the European Union: what are we supposed to do with the refugees? Well you created that problem yourselves. With your own hands you created it. You turned Libya into a second Somalia, and now you are surprised why a stream of refugees is coming from there. What is there to be surprised about, that could have been anticipated.

Syria, too, millions of refugees. And every time the situation gets out of control. Here it got out of control, and there, and there as well. And in Ukraine it looks like it is getting out of control as well. One should probably think first before doing something, and not wave with a baton, supposedly to spread democracy. That is very dangerous.

As to Russian-American relations, we never wanted them to deteriorate. That is the leading country in the world, both economically and militarily. What is worrying is, that in my point of view, the rhetoric has started to go off-scale, sometimes from both sides. That I admit. But when Nato approaches our borders, it is not us who move towards Nato.

They accuse us of everything and anything, but we stayed within those old borders where we were before, and here Nato closes in on us, year in year out. And we hear that now heavy weaponry has to be deployed, which is forbidden under the Nato-Russia Founding Act of 1997, not to mention the promise which was given to us much earlier, that Nato would not expand to the east at all. They are expanding very much! Nato is a military organisation, this is not the EU.

We really never objected to the improvement of relations between Ukraine and the EU, we weren't against that. We just warned about the consequences for Russia, and warned not to ignore Russia. They told us - that is none of your business, we don't interfere in your relations with China either, so don't you interfere in the relations between Ukraine and the EU. OK, but then Ukraine can't be in our free trade zone, otherwise a huge flow will come our way. That is economics, it's not security and not politics. We just don't want to be flooded by duty-free goods under the guise of Ukrainian products from the EU. I think that's a fair thing to ask.

Of course, it is naive to think about strengthening relations until the conflict in Ukraine is settled.

Everyone says that the conflict in Ukraine can be settled only on the basis of Minsk. But Minsk is not being implemented. After all, what is written in the Minsk agreement is that a new constitution for Ukraine comes first, an amnesty law, a law about local elections. These are the first points, without which nothing else must happen. Nothing was fulfilled, neither by Kiev nor by Donbass.

Donbass has already taken one big step. We indeed leaned on them. In the beginning they voted for independence, and now they said no, we are ready to remain a part of Ukraine with a status of autonomy.

And what has Kiev done? Nothing. The most important thing is that in a conflict - believe me, we know, including the Chechen conflict - if the two sides in the conflict don't sit down and start talking, then no mediators will be able to solve it for them. That is impossible, it doesn't happen in life. And Ukraine doesn't want direct contacts, they don't want to sit at one table. Until they make that move, nothing else will happen, I'm convinced.

FT: We have heard a lot about what is amiss. So how can Russia's concerns be addressed? You have described in detail what is not working. What kind of new Euro-Atlantic security architecture should be built?

SI: President Putin has spoken about this topic more than once. First, a new security architecture must be based on several in my point of view uncontested and immutable principles: Compliance with international law. For example, did you bomb Libya with a mandate from the UN? No. If that rule is not observed, that's bad already.

Second, the principle of multipolarity. Democracy in the UK, the EU, the US is one thing, democracy in Saudi Arabia another. In other words: You can't strengthen your own security at the expense of the security of others. If you want to strengthen your security, you have to reach agreement with everyone, so this is done voluntarily and with the consent of all, and not just in response to the desire of one hegemon. I think you know very well who is the hegemon here.

By the way, I find it funny to hear how Russia is being accused of military aggressiveness. There is an expression: "This is nothing but raving nonsense". This is a psychological disorder, and obsession with the idea that Russia will invade the Baltics. That is sick. This is of course being done consciously by the Baltic states themselves in order to receive money from you. I tell you frankly, they need your money, and therefore [they shout] 'Help! They are invading us!' You will be forced to ready your soldiers, to send your aircraft there, to spend your defence budget for unnecessary purposes. That's the idea.

But you cannot compare the Nato budget and the Russian defence budget - I know this very well. We are talking about an elephant and a pug, a behemoth and a house cat. That is the comparability of our military budgets. We have very different military assets. But the most important thing is: Why do we have to do this? What, do you seriously think that we want to unleash war with Nato? Are we suicidal? What do we need this for?

But they are accusing us of all mortal sins, because it's advantageous. That's all. Hence the lack of understanding and the rhetoric. Because not all people know the real situation in the world, in the economy, in security. Many ordinary people believe what they read in the papers and see on TV - both in your country and here in Russia. And this frightens me. There is a very big gap between the evaluation of the real situation and the virtual one. And that's bad. Count me out. Next is nationalism and xenophobia. By the way, not just here, also in your country. Look how rapidly right-wing parties are growing there, extreme-right. I don't mean the Tories, you know what I mean. And the same in France, and in a number of other countries.

By the way, in Europe, we hear many say that Putin is right. But that's already a question of values - family values, religious values, traditional values. In that sense, of course, we will firmly assert our values, without infringing upon or offending yours.

FT: I would like to come back to my question about the security architecture. What does Russia want and how, in concrete terms, can we get there? Are the proposals Dmitry Medvedev put forward in 2009 about a New Helsinki still alive?

SI: Today, yes, of course, we don't reject that idea, that principle. This is called a single indivisible security from Lissabon to Vladivostok. And not just security, but also economic co-operation. There can be different regional groupings, we have the Eurasian Economic Union and you have the European Union, although you have, of course, moved a lot further along the path of integration.

However, I'm really interested in seeing what will happen with Greece now, and then with the UK and the referendum, but anyhow, you have moved very far already with regard to integration.

We stand only at the beginning of this path - five countries in total, and we don't have a common currency yet, that is a question of the distant future I think. But nevertheless, if you recognise that the Russians are largely Europeans by culture, by religion, by mentality - and that's obviously so - if we talk about Europe, let's talk about a large and common Europe, and not about a Europe with dividing lines.

This idea is good in theory, but it is very far from realisation because bloc thinking remains. Pressure, moralising and mentoring remain - you must do this, you have to develop your democracy like that.

Democracy is not a potato. You can't stick it in the soil and it grows. I repeat, every nation has its own traditions, its own culture. In the end, we also live in a democratic country. We also have an electorate, which at the polls regularly - and I hope that you believe this - overwhelmingly honestly and sincerely votes for one or the other direction of development of the domestic and foreign policy of Russia. We, the authorities, are also dependent on the voters, just like in your country. We live in a democratic country. And if you claim the opposite - that's just ridiculous.

FT: Speaking of the electorate, the domestic political agenda has been dominated by the narrative that Russia is under threat. But such a situation is not sustainable. Will the political agenda change, maybe towards themes such as the economy?

SI: That depends not just on us. I would say that last year was not a year during which we lived under threat. I would say it differently - last year was a year of euphoria from the reunification of Crimea. That is more accurate. I hope that you believe that 90 to 95 per cent of Russians definitely welcomed the reunification of Crimea with Russia - ask anyone, they will tell you. That is a fact. But it is not possible to live in euphoria or under threat all the time.

But not everything depends on us. If the military infrastructure of Nato is greatly strengthened in eastern Europe, or the US starts to really place potent missile defence systems in Romania, Bulgaria or Poland, we will say that the external threat has grown stronger. I am telling you that honestly in advance. Not everything depends on us, it also depends on you.

But if nothing radical in that sense happens, then, of course, issues like the economy, the quality of life, ecology and transport will completely naturally come to the fore. That's normal. Actually people live like that in any normal country. We will have parliamentary elections in 2016, no matter if in September or in December. The parties are starting to prepare now, to introduce their programmes, fight for voters. Let's see what the main slogans will be. I believe that economic slogans will be at the forefront, the problems of health, education, just like the main questions in electoral campaigns in your country.

In fact, we do not differ much. We swear a lot, but in fact we do not differ much.

This an abbreviated transcript of an interview with Sergei Ivanov conducted by Kathrin Hille and translated from the Russian

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 #7
Kremlin administration chief says high oil prices were Russia's curse

MOSCOW, June 21. /TASS/. High oil prices were Russia's curse rather than blessing whereas the current level of oil prices and the exchange rate of the national currency, the rouble, are ideal for launching structural reforms, Kremlin administration chief Sergei Ivanov said in an interview with the Financial Times newspaper published on Sunday.

He said there were two different points of view on oil prices. "One says that Russia's richness in mineral resources, primarily oil, is a blessing for Russia. There is a different point of view, to which I subscribe, that mineral resources wealth and in particular high oil prices, is not a blessing but a curse for Russia, " he said, adding that in the 2000s, when oil process had been very high there was next to no motivation for carrying out structural reforms and diversifying the economy.

"But now, I believe, with the oil price somewhere above US$60 per barrel and the rouble around 55 to the dollar, that is an ideal ratio and it is time to engage in structural reforms right now," Ivaniv said.

He admitted that Russia had needed structural reforms long before the sanctions were imposed. He also admitted that the sanctions had done "a certain damage." "As the most painful I would single out the decline in real incomes of the population and, as a consequence, the fall in consumer demand," he added.

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#8
www.rt.com
June 20, 2015
World no closer to Cold War-style nuclear standoff, Putin tells global media chiefs

Russia's deployment of 40 additional nuclear ballistic missiles in response to the US military buildup in Europe doesn't mean the world is at greater risk of a nuclear war, President Vladimir Putin told the heads of global news agencies.

The Russian head of state held a late-night meeting with top executives from 12 foreign news agencies on the sidelines of the St. Petersburg International Economic Forum. Most of the event was held behind closed doors and not recorded.

The extra deployment is necessary to protect Russia and is a response to a growing threat from the West, Putin explained as EFE, a Spanish news agency, later quoted him as saying. Pentagon is reportedly considering placing additional American heavy weapons, including artillery, in Europe. Washington says it is needed to protect its NATO allies from an aggressive Russia.

"Russia is not an aggressor and does not favor increasing the level of tension... but is obliged to respond to Western actions targeting Moscow," EFE cited Putin as saying, without using direct quotes. The meeting was apparently held under so-called Chatham House rules, where participants' comments cannot be reported directly without their express permission.

"The increase in belligerent rhetoric between Russia and the US does not mean the world is at greater risk of nuclear confrontation," the agency added, summarizing the Russian leader's response.

Putin also commented on the seizures of Russian state property in European countries, intended to enforce a Hague court ruling to pay billions of dollars in damages to shareholders of the now-defunct oil giant Yukos. The Russian president said Russia cannot fail to react to the asset seizures, but would not elaborate, saying it was up to lawyers to come up with a solution.

He added that the arbitration court's decision to order Russia to pay $50 billion in compensation is based on the European Energy Charter, which Russia has not ratified. It makes the decision unlawful, because the court was acting beyond its jurisdiction, Putin said, according to EFE.

Commenting on the recent G7 summit in Bavaria and the statement by Canadian Prime Minister Stephen Harper that Russia was not welcome in the group, Putin implied that Harper would act as instructed by Washington on this issue.

"I don't want to offend anyone, but if the United States says Russia should be returned to the G8, [Canada's] prime minister will change his opinion," Putin told The Canadian Press.

Putin reiterated his calls for Western powers to pressure the government of Ukraine to stick to its obligations under February's Minsk peace agreement, a ceasefire deal between Kiev and rebels in the east of the country, which appears to have completely broken down in the past few weeks. The Russian president also said that the government of Petro Poroshenko must stop the economic blockade of the rebels in the east, implement constitutional reform and call local elections in the Lugansk and Donetsk regions, AP reports.

Putin denied allegations by Kiev and its foreign backers that Moscow is sending troops and weapons to eastern Ukraine. He said that once Kiev stops trying to solve the crisis by force, and the Ukrainian government returns to seeking a political resolution to the crisis, the rebels would no longer need to take up weapons to defend themselves.

In response to other questions, Putin defended Russia's right to host the FIFA 2018 World Cup, insisting that the country had won the right to host the event fairly. He said that people claiming that the selection was marred by corruption in FIFA should present the evidence of their allegations.
 

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 #9
Reuters
June 20, 2015
After midnight in the library, Putin sets out his world view
BY PAUL INGRASSIA
Reuters Managing Editor
 
It was two minutes before midnight when Russian President Vladimir Putin finally entered the meeting room in the Boris Yeltsin Presidential Library, more than three hours late, to be interviewed by a dozen exhausted journalists.

His retinue seemed wearily accustomed to the late-night regimen, but Putin himself - after back-to-back meetings, a speech and an on-stage interview at his annual business conference here in his home town of St Petersburg - was fresh, fulsome and feisty.

"We won in a free fight and we are going to host the World Cup," he declared, slapping away suggestions that Russia cheated with scandal-plagued FIFA to snare the 2018 competition. "That's it!"

As for whether Russia can't, or simply won't, control its border to stop heavy weapons flowing to separatists in Ukraine: "These people got weapons with which to defend themselves. They got them in various ways."

To the suggestion by Canada's premier, Stephen Harper, that Russia be expelled formally from the Group of Eight major economies: "I don't want to offend anyone, but if the United States says Russia should return to the G8, the prime minister will change his opinion."

All of it was pure Putin, veritable Vlad. He's habitually hours late for meetings - with the pope, Germany's Angela Merkel and most others - so it's clear who's in charge before discussions begin.

He's seemingly indefatigable at age 62. He's always assertive. And he clings to perceived slights at the hands of the West, particularly the United States.

"I am convinced that ... after the Soviet Union was gone from the political map of the world, some of our partners in the West, including and primarily the United States, of course, were in a state of euphoria," he told Charlie Rose, the American television interviewer chosen by the Kremlin to do an on-stage interview at the conference on Friday afternoon.

Referring to the eastward expansion of NATO, he said: "Some of our partners seem to have got the illusion that ... a vacuum of sorts developed that had to be filled quickly. I think such an approach is a mistake."

He added: "Is there anyone who wants to be neglected and humiliated? There is something about respect, or lack of respect. When we see an unwillingness of partners to talk to us, then we see disrespect of our side."

SHOWCASE FORUM LOSES LUSTER

The conference, officially the St Petersburg International Economic Forum, has lost luster since last year, when the West imposed economic sanctions after Russia seized Crimea and supported separatists in eastern Ukraine. In years past, Sting and other headliners provided entertainment. This year, Carla Bruni, wife of former French President Nicolas Sarkozy, gave a concert, followed by a midnight dinner.

Few senior Western executives attended, save for some from oil companies seeking Russian deals. Last year some executives predicted Russia's alienation from the West would pass quickly. Nobody was saying that this year.

The big-name prime ministers attending this year were all "formers" - Britain's Tony Blair, Italy's Romano Prodi and Francois Fillon of France. Kyrgyzstan's president and Mongolia's prime minister were there, but the most prominent among the small-nation chiefs was Alexis Tsipras of Greece.

The leftist prime minister, whose nation teeters on a debt default that could eventually threaten its membership of the European Union, got a prized speaking spot on Friday, right after Putin. His presence and warm embrace by Putin were a clear jab at the EU establishment. Tsipras did not make major pronouncements on the debt crisis, but spoke in general terms about the strategic importance of Greece.

Putin, however, laced his speech with enough statistics to clog a computer. Among them: Russia's unemployment rate (a modest 5.8 percent), gold and foreign currency reserves ($361.6 billion), budget deficit from January to May (3.6 percent), "non-raw commodity" exports (up 17 percent in first quarter).

His message: Russia is weathering Western sanctions just fine. "I would like to point out that at the end of last year we were warned ... there would be a deep crisis," he declared. "It has not happened. We have stabilized the situation..."

Putin didn't mention the 3.2 percent economic contraction this year forecast by Russia's central bank, or the 11.5 percent prime interest rate to prop up the rouble.

Both are pinching the lives of average Russians, though Putin's appeal to patriotism and increasing control over the media has kept his domestic approval rating above 80 percent.

PARALLEL VIEWS

In the interview he placed blame for the Ukraine crisis squarely on the Kiev government and the West. "It was a coup d'�tat, an armed seizure of power," he said, referring to last year's revolt that ousted a Moscow-backed Ukrainian president.

Only Western pressure on Kiev for a political settlement that gives substantial autonomy to Ukraine's Russian-speaking east and amnesty to rebel fighters will resolve the crisis, he said, adding: "We are against solving issues by force."

That smacks of duplicity to Western leaders who say the Russian military is covertly fighting in Ukraine alongside the separatists. Putin stoutly denies that.

As for Western suspicions that the separatists used a Russian missile to shoot down a civilian airliner last summer, albeit probably by accident, Putin says he's seen evidence the missile might have penetrated the plane's tail section with a trajectory indicating it came from Ukrainian government forces.

It's like two parallel views of reality, never intersecting, but Putin seems to revel in every rebuttal.

Well past midnight, after an hour of discussion, the Russian president did find one thing for which to compliment America: its move toward diplomatic recognition of Cuba. "We welcome that," he said. "It is the right thing for the U.S."

As the clock neared 1:30 a.m., Putin was asked about his personal life. "My daughters came to St Petersburg and I was up until 2 a.m. yesterday talking to them," he said. "I have good relations with my ex-wife. I have a good plan for the future. I'm okay."

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#10
Moscow Times
June 22, 2015
Putin Offers Little Change at Russia's Top Economic Forum
By Ivan Nechepurenko and Peter Hobson

ST. PETERSBURG - More than a year into an economic firestorm that is pushing Russia into its first recession in six years,   Russia's flagship economic forum in St. Petersburg was titled "Time to Act."

With Western sanctions over Ukraine and fallen oil prices battering the economy, thousands of business executives, officials and experts gathered at the St. Petersburg International Economic Forum last week, looking for signals on what Moscow's next step would be.

Among the options: reconciliation with the West, root-and-branch economic and political reform, or an embrace of Chinese cash.

But President Vladimir Putin in his keynote speech Friday opted for none of the above, railing against the United States, ignoring calls for comprehensive reform, and playing down Russia's much-mooted "pivot" to Asia.

Addressing a packed hall, Putin admitted that the Russian economy was shrinking, but radiated confidence that the country would weather the storm.

"We have stabilized the situation, absorbed the negative short-term fluctuations, and are now making our way forward confidently through this difficult patch," he said.

Flanked by businessmen from Bahrain, China, Argentina and Germany on the forum's main stage, Putin trumpeted Russia's openness to investment: "We are responding to the restrictions imposed from outside not by closing off our economy, but by expanding freedom and making Russia more open. This is not a slogan; this is the substance of our actual policies," he said, without listing any specific measures to make this scenario more likely.

Russian economic data, however, is bleak: The economy shrank by 2.2 percent year-on-year in the first quarter of 2015, and analysts expect a contraction of around 3 percent for the year in full. The ruble has lost more than one-third of its value against the U.S. dollar since last summer due to sanctions and falls in the price of oil, Russia's main export.

Industrial output and capital investment have plunged, while declining incomes have caused sharp falls in consumer spending and spurred the biggest rise in poverty in Putin's 15 years in power.

An oil price boom that sustained growth in the 2000s has, at least for now, ebbed. Analysts predict that Russia's economic recovery will be long and weak.

Yet Putin's message to the country's economic elite was that the government had the situation under control and Russia was bound to recover and become more prosperous in the longer term.

No Sanctions Respite

Many foreign investors at the forum appeared to err on the side of Putin and voiced their confidence in Russia's long-term potential. Maurizio Patarnello, CEO of Nestle Russia, which has invested nearly $2 billion in the country, channeled the sentiment: Russia was too big a market to lose, he said, even if its economy will take longer to develop than previously thought.

But Patarnello also had his finger on another zeitgeist: "You won't find anyone here saying anything good about sanctions," he said.

On this Putin offered no respite. A question and answer session with the president following his speech was dominated by Ukraine, where the West accuses Russia of supplying troops and equipment to separatist militias.

Repeating well-worn mantras, Putin insisted that Western countries must influence Kiev to negotiate directly with the self-proclaimed authorities in the country's breakaway regions.

Russia's policy was not aggressive, Putin bristled, but is a reaction to pressure exerted on it by Western states.

"They [the United States] tell us they know what's best for us. Let us decide what our interests and needs are by ourselves, given our own history and culture," Putin said, earning applause from the audience.

Putin went on to specify that the United States is attempting to influence Russia's internal politics by financing nongovernmental organizations operating in the country.

Asked whether Putin's speech inspired hope of a solution to sanctions that were marring his business, one Russian executive who declined to be named simply grimaced.

More of the Same

Putin was also more or less mute on one mooted alternative for economic growth - drastic reform. Putin's silence contrasted sharply to statements made by other heavyweight former government figures.

"Any crisis is the result of bad management," German Gref, a former minister and now head of Sberbank, Russia's largest lender, said during Thursday's opening session, earning a round of applause.

Russia is in the midst of "a fully fledged crisis" that will require significant reform to overcome, Alexei Kudrin, a former finance minister and a critic of Putin's who is nonetheless loyal to the president, told the session.

Putin did use his speech to call for the creation of a new class of managers who could oversee measures to improve the business climate, but offered neither major reforms nor backing for the opinions voiced by Gref or Kudrin.

The failure to push through bold measures is a familiar story for many. Russians have known what to do to reform the economy for years, said one European executive who declined to be named. What they need to do is "walk the talk," he said.

A drop in the value, if not number of investment deals signed during the conference seemed to reflect a degree of pessimism about the current state of Russia's economy.

Compared to the 175 deals worth over 400 billion rubles ($7.4 billion) signed last year, the 205 agreements signed this year were worth just 293 billion rubles ($5.4 billion), organization committee representative Anton Kobyakov said Saturday.

Asia Pivot

Many at the forum looked for signs in this year's event that sanctions would push Russia to pivot toward Asia at the expense of Europe, which remains by far Russia's biggest trade partner.

The choreography of Putin's address to the forum appeared crafted to make the point - only two of the seven businessmen and officials who shared the stage with Putin hailed from Europe. One of these, Heinz Hermann Thiele, chairman and owner of Knorr-Bremse, a German manufacturer of vehicle braking systems, denounced the destructive effect of sanctions on trade.

The other, Greek Prime Minister Alexis Tsipras, whose country is locked in difficult debt negotiations with European and IMF creditors, used the pulpit to announce that "We in Europe were delusional for some time. We believed we were the center of the world."

But both government officials and Putin himself denied that Russia was seeking to boost trade with the East as a replacement for the West.

"Not only Russia, but the whole world is looking to Asia. Europe is also trying to develop these relations, while we are neighbors [with China]. This is a natural movement," he said.

The pivot to the east is "a myth," said one Russian executive, adding that Moscow was rightfully fearful of China using Russia's temporary weakness to establish a domineering position in the country's economy.

With Western governments reducing pressure on European and North American executives to boycott the forum - which in 2014 caused many to cancel plans to attend - the event bustled with Western businesspeople.

Sitting beside Putin in the question and answer session, Ronnie Chan, a Hong Kong tycoon, looked out at the hall and noted a lack of Chinese faces.

"I'm not sure that your businesspeople are ready to take advantage of the China market," he said.

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 #11
Business New Europe
www.bne.eu
June 22, 2015
Russia's recovery faces a reality check
Chris Weafer of Macro-Advisory

After a relatively positive performance for Russia's economy in the first quarter, the second quarter has brought more of a reality check, with sharply lower numbers across many categories reported in April and May. The preliminary GDP estimate for April shows a contraction of 4.2% year on year, after a more modest decline of 2.2% (revised from a first estimate decline of 1.9%) for the first three months of the year. It is already clear from preliminary May data that the decline has worsened. At Macro-Advisory we expect a second-quarter drop of around 5% in GDP. To that extent the economy is not headed into the eye of the storm, which would imply a period of false calm ahead of a further battering, but is actually now in the worst period of the downturn.

But while the downward trend has accelerated, we expect to see a slight improvement in the third quarter and a much better fourth quarter with clear evidence to support the positive, albeit modest, growth expected for 2016. We don't see any reason to adjust our current year forecast for a decline of 3.5% in GDP and a 0.5% recovery in 2016.  This "worse before it gets better" assumption was also recently echoed by the International Monetary Fund (IMF) and by Russia's Economy Ministry, both of which have somewhat improved their two-year outlook and are now close to our forecasts.

Consumer blues

The big hit, and the main reason for the headline decline, has come in the consumer sectors, eg. retail sales volume collapsed by 9.8% on year in April as households continue to be squeezed and have little reason for optimism. The May year-on-year decline was a little better at 9.2%. Low nominal wage growth, which is now in the range 5-7% and which led to a real decline of almost 7.5% in May, is certainly one of the main reasons for the headline decline. Aligned with that is the continuing high cost of debt servicing, double-digit inflation and concerns over job security, which many polls show as the main areas of concern and the reasons why consumer activity has fallen so fast.

On the optimistic side of the equation is the fact that inflation appears to have peaked at just under 17% in March and it was below 16% at end-May. The Central Bank cites the expected downward trend in inflation (it expects 12% by year-end) as justification for cutting its benchmark key rate from 17%, at the start of the year, to 11.5% as at mid-June. Based on the CBR's inflation estimate there is room for at least one, if not two more 100 basis point (bp) rate cuts this year, but most likely they will come in the autumn when the declining inflation trend is confirmed. Although the cost of debt for households and small and medium sized businesses is still relatively high, the significant cut will help ease pressure on both in the second half of this year.

The trend in the ruble, which staged a rapid recovery from over RUB60 against the US dollar at the end of last year to under RUB50 at the start of May, is more of a mixed blessing. On the one had the recovery has greatly reduced the widely held fears of late year that Russia was heading for a more destructive 2015 and has helped stabilize both public and business confidence, albeit both are still at low levels. But the Central Bank of Russia (CBR) and Finance Ministry both expressed concerns that the ruble appreciated too fast and risked undermining some of the positives in the economy. With the ruble trading close to RUB50, or better, against the dollar it is more difficult to keep the budget deficit low and for industry to remain competitive against imports and in the export markets. The clear indication from officials at both agencies is that their preferred rate is around RUB55-56 against the dollar. That is better for export tax revenue and better supports import substitution and export growth, which have emerged as key parts of the government's long-term recovery strategy.

Compared to the almost chaotic flip-flopping of ruble management in 2013 and 2014, at least the message of where the government would like the ruble to be positioned is becoming clearer even if it also has raised questions over just how much independence the CBR now has. For example, recent comments from the head of the bank, Elvira Nabiullina, suggests that she is not very happy with the rapid interest rate cuts and would have been happier to match the rate cuts with actual inflation reduction. It seems that the Kremlin sided with the Economy Ministry's view that the high debt cost burden is a major contributor to the current decline and taking the inflation risk is worth it to try and stimulate growth.

The other point which is also now clearer is that the government favours a longer-term weak ruble policy rather than the previous position of trying to defend the currency. That proved to be very expensive in terms of foreign-exchange usage in 2014 and achieved little. The fact that people did not panic over the ruble collapse in late 2014, other than to take cash out and buy durable goods due to inflation and sanctions concerns, also allows this position change. A weak ruble is a key part of the emerging strategy to boost the competitiveness of domestic industries and to expand both the volume and range of exports outside of extractive industries.

At the same time of course we should not expect the ruble to return to the extreme volatility seen late last year. Since the start of this year the CBR has shown itself to be very capable of preventing the sort of extreme volatility which so deeply cut into confidence in November and December.

Hope for reforms

As mentioned the IMF is one agency which recently slightly improved its outlook for this year and next due to the rapid cut in interest rates, the expected decline in inflation and the benefits to the economy from the weaker ruble. But, while more positive than it was late last year, the agency also very clearly highlighted the fragile nature of the economy and the threats which still endanger recovery prospects from sanctions and the unpredictable oil price.

However, while external events are outside of the government's control over the short to medium term, especially as geopolitical priorities are not expected to be compromised, the most decisive driver of the trend in the economy will be the government's policy and spending response to the changing environment. There can't be anybody with an interest in Russia who cannot recite the list of reforms and structural changes the economy needs. These are all long term in nature and will only be able to deliver change on an extended time line. To that extent if the strategies of import substitution, value-added investment in raw materials and export growth promotion actually move from rhetoric to programmes of substance, then this will certainly be one of the most positive outcomes from this crisis period.

More immediately, the government needs to be more consistent with its ruble policy, about which the recent evidence has been much more encouraging. It also needs to make changes to the budget. The Finance Ministry has recently tabled four variants of the budget for 2016-18 with different degrees of savings and tax assumptions. In other words, some tough choices which represent either muddling through and hope for the best or a serious acceptance of the need for real changes starting right now.

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 #12
Moscow Times
June 22, 2015
Russian Security Fear Citizens Joining ISIS More than Ukrainian Separatists
By Anna Dolgov

More than 1,000 Russian citizens are believed to be fighting alongside the Islamic State, but Moscow is unable to stem the flow of militants to the terrorist group, nor the flow of "volunteers" to separatist forces in eastern Ukraine, a top security official said in an interview published Monday.

Islamic terrorism is "one of the main threats" facing Russia and its former Soviet neighbors, Security Council chief Nikolai Patrushev said in an interview with Kommersant daily.

The other threat, which Moscow sees as carrying "no less danger," is the supposed "destabilization" brought on by pro-Western political protests of the kind that have led to government changes in former Soviet republic such as Georgia and, more recently, Ukraine, according to the interview.

"It is clear that behind the project of destabilizing that country [Ukraine] is concealed an attempt to create an instrument for radically weakening Russia," Patrushev was quoted by Kommersant as saying.

He accused the United States of having "initiated" the ongoing crisis in Ukraine, but denied Russia's responsibility by brushing off the fact that the crisis began when Ukraine's previous administration caved in to Moscow's pressure and pulled out of a planned European association deal, prompting Ukrainians who supported the agreement to take to the streets.

Russia had no hand in setting off the crisis, Patrushev said, although he conceded that Moscow did help former Ukrainian president Viktor Yanukovych, clear up his mind about the European deal.

"Ukraine is part of the free trade zone of the [Moscow-led] Commonwealth of Independent States, and Yanukovych simply had the consequences of that step explained to him," Patrushev said. "He had not taken them into consideration before, and decided to take a timeout to figure out those questions."

After Yanukovych's government fell, Moscow annexed Crimea from Ukraine under the guise of protecting the peninsula's Russian speakers, and Russia's state-run television channels broadcast continuous reports about the supposed atrocities of Ukraine's new government. But Patrushev denied Russia's responsibility for scores of its young men who have traveled to eastern Ukraine to fight alongside Moscow-backed separatists in the Donetsk and Lugansk regions.

"We do not call for anybody to do that and do not encourage that. But its impossible to really prevent that," he said, adding that Russia could not shut down its border with Ukraine, as Kiev has urged it to do in order to prevent the inflow of fighters.

Moscow is more concerned about its citizens who join the Islamic State terrorist organization, Patrushev was quoted by Kommersant as saying.

"There have been increasingly frequent cases of the citizens of Russia and Central Asian republics joining the terrorists' ranks," he said. "Many of them are involved in military action today in Syria. But they will present the gravest danger after returning home."

Patrushev said he saw "no possibility" of stopping the flow of fighters to the terror group. But he blamed the difficulty on the U.S., which he said maintains "double standards" by fighting the Islamic State while supporting forces opposing Middle Eastern dictators such as Syrian President Bashar al-Assad even though such opposition forces include a heavy Islamist presence.

"That same Islamic State, when it is fighting against [Syria President Bashar] Assad, receives the support of the U.S.," Patrushev said. "And simultaneously they are bombing it. Until they stop those games, all of this will go on."

Another top Russian official and close presidential associate, Kremlin Chief of Staff Sergei Ivanov, also blamed U.S. meddling for problems in the Middle East and Ukraine.

"It seems to me that the Americans themselves have understood that the situation in Ukraine is getting out of control, I tell you openly. It is simply getting out of control," Ivanov told Financial Times in an interview published Monday.

Other examples of out-of-control situations include the fallout of military action in the Middle East and the toppling of dictators such as Libya's Muammar Gaddafi or Iraq's Saddam Hussein, according to Ivanov.

"Hussein was not an ideal ruler, you may think of him whatever you like, and he probably doesn't deserve the best epithets," Ivanov was quoted by Financial Times as saying. "But you have to admit the obvious, that during his time, there were no terrorists in Iraq. He hated them and annihilated them, he hung them and shot them, that's the truth."

"And what do we have now in Iraq? Libya? They bombed Libya, killed Gaddafi, and what now - has it gotten better?" Ivanov said. "Syria, too, millions of refugees. And every time the situation gets out of control. Here it got out of control, and there, and there as well. And in Ukraine it looks like it is getting out of control as well."

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#13
Fort Russ
http://fortruss.blogspot.com
June 21, 2015
Patrushev: "Russia can't prevent volunteers from going to the Donbass"
Translated from Russian by J.Hawk
[http://top.rbc.ru/politics/22/06/2015/558737f79a794737d8fd58e5]

Russia "doesn't call on or encourage" Russian volunteers to join Donbass militia, however, "it's impossible to stop the process," Patrushev said in an interview with the newspaper Kommersant. He noted that the refugees from Ukraine tell their "relatives and friends" about the "atrocities which are being committed there," after which people depart for the Donbass under the influence of emotions and take part in combat.

Patrushev said that he can't close the border with Ukraine. "What, are we supposed to organize a blockade, like the one around Leningrad? For the entire Donbass population? We are practically feeding them now, their situation is extremely difficult."

The Security Council Secretary underscored that what's happening in eastern Ukraine is a "civil conflict" in which it would be "inappropriate" for Russia to intervene.

In Patrushev's opinion, the US is responsible for starting the conflict in eastern Ukraine. Since, according to Patrushev, US president Obama said that Washington acted as an intermediary during the Ukraine government change, he de-facto admitted the US initiated the conflict. Citing Victoria Nuland, Patrushev also said that the US spent $5 billion on Ukraine [since 1991, on developing Ukraine's democratic institutions]. It's the regime change that triggered the civil conflict in eastern Ukraine.

Patrushev views the Ukraine "destabilization project" as an effort "create an instrument to severely weaken Russia."

In April, Patrushev said at the meeting of the Shanghai Cooperation Organization that the West wants to "turn Ukraine into an agrarian country."

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 #14
Sputnik
June 21, 2015
Farewell to Arms: Over 10,000 Soldiers Desert Ukrainian Army

More than 10,000 cases of desertion have been registered in the Ukrainian Army since the outbreak of the Donbass war in April 2014, Ukrainian Vesti reported.

In 2014 the army suffered heavy desertion and nearly 30 percent of the servicemen called up in the first wave of mobilization (March 17) abandoned their positions, Ukrainian President Petro Poroshenko said.

Ukrainian parliament Verkhovna Rada has announced six waves of mobilization so far. By the end of 2014 the strength of Ukrainian Armed Forces grew from 130,000 to 232,000.

Ukrainians have been protesting against the mobilization. They travel to work abroad or simply reside at their relatives' in other countries. Almost 1,3 million Ukrainian draftees live in Russia.

Since April 7, 2014 the Kiev authorities have been waging war against Donbass self-defense forces who rejected the legitimacy of the coup-imposed Ukrainian government and declared the independent republics of Donetsk and Lugansk.

Official figures estimate the number of victims to near 6,500. But the German intelligence reported of 50,000 victims in February 2015.

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 #15
http://gordonhahn.com
June 21, 2015
One Day in the Life of 'Ukrainian Democracy'
By Gordon M. Hahn

Samantha Power's delusions notwithstanding, due to the inordinate presence of non-democratic elements and outside the Maidan government, 'Ukrainian democracy' remains a distant dream. We learned from the shortcomings of early 'transitology' in the 1990s that free and fair elections do not a democracy make. Rule of law, minimal corruption, state monopoly over the means of coercion, judicial independence, and a political culture of some trust and compromise rather than distrust and conflict, among other factors are prerequisites for the consolidation of a democracy. Ukraine lacks almost all of these key characteristics.

Moreover, after a violent revolution from below led by a coalition of neo-fascists, ultra-nationalists, national socialists, and both national and liberal democrats, the Maidan regime's unity is tenuous at best. Ukraine's Maidan regime seems to be melting down slowly, split between moderate nationalists, on the one hand, and ultra-nationalists and neo-fascists, on the other. A small democratic faction plays an unofficial second fiddle to the former. Poroshenko appears to be trying to shift or give the appearance of shifting to an alliance with the democrats and distancing himself from some of the worst of the ultra-nationalists, in particular those who openly seek to overthrow him and institute a full-blown fascist regime. However, the latter, inside and outside of government, are intensifying their efforts to create a conditions whereby they might rise to power.

During one day in the life of 'democratic' Ukraine - beginning from prime time television hours on June 17th and extending to the end of the work day on June 18th - this dynamic was manifested by: (1) further attacks on press freedom, (2) resistance to disarmament by well-armed neo-fascist volunteer battalions that will be the hammer of any future neo-fascist seizure of power in Ukraine, and (3) a high-ranking Ukrainian official's praise for the suspects in the murder of a journalist.

A Call for Concentration Camps

On the evening of June 17th prime time television viewers in Ukraine were treated to another of the neo-fascist performances that are now part of the country's routine. Ideologist of the Ukrainian far right Dmytro Korchynskiy urged the Maidan regime to set up concentration camps for the Donbas's and Crimea's population and carry out a full ethnic cleansing and depopulation of the Donbas rebel regions and Crimea: "Americans are our teachers of democracy. The USA is truly the most democratic country in the world today. All democratic institutions were preserved in America during WWII, such as elections, etc. Nevertheless, several million American citizens were deported to particular concentration camps - American citizens of Japanese ethnicity. In wartime they constituted a potential threat. The USA, having preserved the high level of humanism inside its own nation, carried out a nuclear strike upon Japan. They also bombed German cities. Eighty per cent of residential buildings in Germany were destroyed by Anglo-American air raids. The doctrine implied shelling of residential areas first and foremost in order to demoralize German soldiers at the front, etc. Thus, we also should have the highest level of freedom in Ukraine. We have too little freedom. We should have more freedom. Nevertheless, in the front-line zone and occupied territories we should act in the American way; that is, if we lost territories and cannot get them back, they must be lifeless. If they cannot be ours, they ought belong to no one" (Dmytro Korchinskiy's comments on Ukraine's channel '112', 17 June 2015 at "Na ukrainskom TV prizvali k sozdaniyu kontslagerei dlya zhitelei Donbassa," YouTube, 17 June 2015, www.youtube.com/watch?v=HSv3fixJPc4, last accessed 19 June 2015).

The Maidan Regime and Press Freedom

Media continue to come under attack from neo-fascist elements within and around the Maidan regime. For example, the Vesti news company has been under attack from the government, siloviki, and Right Sector (RS) for nearly a year (http://gordonhahn.com/2015/04/21/maidan-ukraines-authoritarianism-surplus-update-on-maidan-ukraines-democracy-deficit/ and http://vesti-ukr.com/strana/104230-gazeta-vesti-i-svoboda-slova-v-jepohu-poroshenko). On June 18th the repression resumed. Men in bullet proof vests, calling themselves the tax police, broke into the offices of of the Vesti news company and refused to provide any identifying documentation.  Along with confiscating all of the Vesti office's servers, computers and laptops, Ukraine's tax police walked off with the personal money, gasoline filling station debit cards, and notepads of Vesti employees. (http://vesti-ukr.com/kiev/104113-nalogoviki-pokinuli-ofis-vestej-c-lichnymi-dengami-sotrudnikov). As Vesti's offices were being overturned, siloviki without identifying badges on their uniforms gathered in numbers outside the offices along with "titushki" - a term used for hired ruffians employed by the Yanukovich regime to battle the Maidan protestors during the revolutionary days two winters ago. These mob of disguised state agents and hired thugs, Vesti conjectured at the time, were to storm the building once the tax police left, but after the paper's website let it be known that they were aware of the threat, the mob dispersed (http://vesti-ukr.com/strana/104274-vlasti-gotovjat-novye-provokacii-protiv-vestej). In other words, the Poroshenko administration and/or its neo-fascist allies are employing the same coercive tactics used by the dastardly Yanukovich regime that the West considered needed overthrowing.

Only Ukraine's Opposition Bloc deputies have responded to the Vesti attack in any significant way, raising the issue in the Supreme Rada, Ukraine's parliament, to no apparent effect thus far. The Opposition Bloc is dominated by deputies close to ousted Ukrainian President Viktor Yanukovich and his Party of the Regions and seeks to raise the issue at the Supreme Rada's Committee for Freedom of Expression and Information Policy. However, the committee's chairwoman, Viktoria Sumar, according to a Vesti source in the committee, is likely to block the issue from coming up before the committee. Sumar is a political client of the pro-neofascist MVD chief Arsen Avakov, notes Vesti's source (http://vesti-ukr.com/kiev/104085-komitet-rady-po-svobode-slova-rassmotrit-situaciju-s-vestjami).

Vesti's editor-in-chief Ihor Guzhva and Opoosition Bloc Rada deputy Yurii Pavlenko held a news conference in the wake of the tax police's raid to condemn the regime's attacks on freedom of the press. In particular, Guzhva noted:

"The current authorities just show miracles of ingenuity in fighting the media. Various things have happened. Under Yanukovich they removed me from the post of chief editor of the newspaper Segodnya (Today), if you remember in 2012, after we prepared material on Mezhyhiria gathered from a flightover. There was a big scandal. The staff of the newspaper Segodnya, where I worked, threatened a strike, and I was eventually fired.

That is, I have no sentimental feeling toward Yanukovich, but in fairness I must say that I really can not recall that under Yanukovych or Kuchma similar methods of pervasive pressure were. Most importantly, when the tax police tormented Channel 5, when it tormented channel TVI, remember, in 2012 and 2011, then it was seen as a struggle for freedom of expression. Then international organizations and non-governmental organizations in Ukraine spoke out, because it was seen as pressure on the media by presenting them with invented tax charges. Now, the powers that be pour it on, saying: We are fighting the media which make our life difficult, and this is treated as normal. This is the most dangerous thing in this story" (http://vesti-ukr.com/strana/104241-segodnja-vesti-a-zavtra-ljuboe-drugoe-smi).

On June 20th Vesti reported that the Ukrainian authorities were planning new attacks against the beleaguered news agency. Its sources in the State Fiscal Service (GFS) claim that they have been ordered to prevent publication of the newspaper 'Vesti' and stop the work of the entire 'Vesti' holding company, which includes the newspaper, the magazine 'Vesti Reporter', 'Vesti' radio, and Vesti's website "within the week." Thus, according to Vesti, Ukraine's various siloviki are preparing "a series of provocations" (http://vesti-ukr.com/strana/104274-vlasti-gotovjat-novye-provokacii-protiv-vestej).

Meanwhile, numerous other news agencies and television channels are under similar pressures - virtually all television channels, including '112', 'Inter', 'TVi', 'ZIK', and the program 'Nashi groshi'. 'Coincidentally', Channel 5, owned by President Petro Poroshenko, is free from pressure (http://vesti-ukr.com/kiev/104085-komitet-rady-po-svobode-slova-rassmotrit-situaciju-s-vestjami).

Clamping Down on Some of the Ultra-Nationalists Gone Wild

The Maidan regime continues to prove incapable of establishing a monopoly on the means of coercion - an essential element of a viable state - and disarm the neo-fascist volunteer battalions. On occasion it is moving piecemeal against battalion members or some of the lesser battalions who allegedly have committed crimes during and after the 'anti-terrorist' operation, in particular against prisoners. However, the more powerful battalions continue to maraud with impunity. The neo-fascist Right Sector, which organized the 2 May 2014 terrorist pogrom in Odessa, remains at-large ensconced at a new base in Dnepropetrovsk, refusing to disarm or integrate into the official Ukrainian armed forces. The Azov Battalion responsible for the war crime at Mariupol the month before the Odessa pogrom remains at its base in Azov near the sea of the same name on which Mariupol is a port. There are many more loose on the Ukrainian land under Maidan's nominal control.

Members of a smaller radical group and battalion were arrested on suspicion of carrying out the April 16th murder of the popular if controversial Ukrainian journalist Oles Buzina. Early reports were that the suspects were members of the radical nationalist groups 'Revansh' (Reveng) and Chernyi Komitet (the Black Committee), whose members have carried out various attacks in and around Kiev recently, including attacks on President Petro Poroshenko's chocolate company he promised to divest from during the presidential campaign but never in fact did (http://vesti-ukr.com/kiev/104135-po-delu-buziny-gotovjat-aresty-revansha-i-chernogo-komiteta). One of the actual suspects, Andriy Medvedko, was one of the many neo-fascists who helped hijack the democratic peaceful revolution from below that Euromaidan began as and transform it into a violent revolution from below with significant neo-fascist and authoritarian tendencies. He is a member of the ultra-nationalist group 'C14' (http://lb.ua/news/2015/06/18/308640_podozreniyu_ubiystve_buzini.html). During the Maidan demonstrations and revolt he operated under the nickname 'Manson' and was the Maidan's commendant controlling the Kiev city administration building (http://korrespondent.net/ukraine/3529250-natsyonalysty-v-dele-chto-yzvestno-o-vozmozhnykh-ubyitsakh-buzyny). Later, Medvedko participated in the 'anti-terrorist' operation against the Donbas separatists and was a candidate to the Kiev city council from the ultra-nationalist 'Svoboda' party that also helped neo-fascist groups like Right Sector hijack the originally democratic and peaceful revolution and is led by the notorious Ukrainian national chauvinist, Oleh Tyahnibok (http://korrespondent.net/ukraine/3529250-natsyonalysty-v-dele-chto-yzvestno-o-vozmozhnykh-ubyitsakh-buzyny and http://lb.ua/news/2015/06/18/308640_podozreniyu_ubiystve_buzini.html). Another source says that Medvedeko was working as an assistant to a Rada deputy Eduard Leonov, who is also the head of Svoboda's party organization in Transcarpathia Oblast (http://ua-reporter.com/novosti/172789). Until very recently Medvedko worked in the MVD but was fired on 8 June 2015 - just ten days before his arrest. The leader of C14, Yevgenii Karas, who is also a Svoboda activist, rejected the idea that Medvedko participated in the murder saying that given events surrounding the Tornado Battalion (see below), all the anti-terrorist operation volunteers were now being attacked by the regime that created them. Medvedko's other friends said that he had been working on lustration in the MVD  (http://korrespondent.net/ukraine/3529250-natsyonalysty-v-dele-chto-yzvestno-o-vozmozhnykh-ubyitsakh-buzyny). Thus, it could be that he has been framed as a result of infighting within the police organ.

The other suspect, Denis Polishchuk, a former member of the ultra-nationalist Ukrainian National Self-Defense (UNSO) popular in the 1990s and a predecessor to groups like Svoboda and Right Sector. He was also a participant in the 'anti-terrorist' operation, serving as a leader of a unit in the 54th intelligence battalion (http://lb.ua/news/2015/06/18/308640_podozreniyu_ubiystve_buzini.html and http://ua-reporter.com/novosti/172789). A statement by one ultra-nationalist, Petro Savich, noted that Ukrainian ultra-nationalists were able to walk Kiev's streets free "from the anti-fascist, beetle bug (colorado) [1] communist trash" thanks to the efforts of "Medvedko, Karas, and the Dynamo ultras" (http://vesti-ukr.com/kiev/104070-predpolagaemye-ubijcy-buziny-okazalis-radikalnymi-nacionalistami).

Interestingly, when Medvedko and Polishchuk were arraigned in court, the former claimed he was being set up to be charged for shooting innocent civilians on 20 February 2014 as part of the notorious snipers' massacre (http://www.politnavigator.net/obvinyaemykh-v-ubijjstve-buziny-podozrevayut-v-strelbe-po-lyudyam-na-majjdane.html). That atrocity was first attributed to the Yanukovich regime and its special riot police but has been shown to actually have been initiated by members of neo-fascist groups like Right Sector, Svoboda, and others (see Gordon M. Hahn, Working Paper: "Violence, Coercion, and Escalation in Ukraine's Maidan Revolution: Escalation Point 6 - The 'Snipers' of February," Gordonhahn.com Russian and Eurasian Politics, 8 May 2015, http://gordonhahn.com/2015/05/08/violence-coercion-and-escalation-in-ukraines-maidan-revolution-escalation-point-6-the-snipers-of-february/ and Ivan Katchanovski, "The 'Snipers' Massacre' on the Maidan in Ukraine (Revised and Updated Version)," Academia.edu, 20 February 2015,www.academia.edu/8776021/The_Snipers_Massacre_on_the_Maidan_in_Ukraine). Could it be that the lesser known and thus vulnerable alleged murderers of Buzina are being set up by the MVD and Avakov to take the fall for the Maidan regime's skeleton in the closet - the participation of its neo-fascist elements in the snipers' massacre?

Similarly, the lesser known 'Tornado Battalion' has come under pressure from the government in recent days, and Right Sector has spoken out in its defense and appears poised to pressure the regime to back off. On August 18 Ukrainian prosecutors accused members of the battalion of committing numerous murders, rapes, and robberies (http://vesti-ukr.com/donbass/104244-matios-v-prjamom-jefire-rasskazal-uzhasy-o-zverstvah-batalona-tornado and http://112.ua/mnenie/prestupleniya-tornado-privyazali-cheloveka-k-sportivnomu-snaryadu-i-iznasilovali-18-238616.html). The authorities made a failed attempt to disarm the battalion. First, there were reports Tornado was refusing to disarm (http://vesti-ukr.com/donbass/104079-bojcy-tornado-otkazyvajutsja-slozhit-oruzhie-i-ugrozhajut-strelboj). Then the MVD released a statement claiming the crisis was defused and Tornado was prepared to disarm. However, when the expected hour came, the disarmament never came off (http://vesti-ukr.com/donbass/104261-ozhidaemaja-sdacha-oruzhija-batalonom-tornado-ne-proizoshla). Late on June 20th, it was reported that a search of Tornado's base was underway, and the battalion had agreed to disband (http://vesti-ukr.com/donbass/104269-v-mvd-zajavili-o-provedenii-obyska-na-baze-tornado). So the outcome remains uncertain as of writing. However, the prosecutors' claims demonstrate the veracity of this author's claims regarding the neo-fascist threat presented to and from within the Maidan regime.

Indeed, as the Tornado Battalion crisis unfolded, Right Sector weighed in. Right Sector issued an official statement in support of Tornado (http://pravyysektor.info/news/sytuatsiya-dovkola-tornado-tse-udar-po-vsomu-dobrovolchomu-ruhovi/), and commander of Right Sector's 'Ukrainian Volunteer Corps' (DUK) Andriy Stempitskiy stated: "This is an interesting long ago predicted tendency: Attacks are being leveled against all the volunteer units. Azov is already 'Nazi', and the commander of 'Torbado' Ruslan Onishchenko along with his brothers have become very 'harsh, retarded bandits'. (This happened immediately after a contraband group was detained by 'Tornado' fighters). Interestingly, what is being prepared for DUK? Authorities, the war is already over and everything is good in the country? Or has the sense of reality and impunity been lost?" Stempitskiy closed with a threat: "The are slightly more volunteers than there are of you" (http://pravyysektor.info/news/komentar-komandyra-duk-stosovno-sytuatsiji-z-bataljonom-tornado/). Right Sector heavyweight Ihor Mosiychuk - a Supreme Rada deputy and deputy chair of its committee on law enforcement (!) - hailed the two suspects in the Buzina murder as "patriots" who should be recognized as "heroes of Ukraine" (https://www.facebook.com/photo.php?fbid=876552942400658&set=a.107162176006409.18128.100001378805175&type=1&theater).

Finally, Right Sector recently announced that it, the Azov Battalion, and others will march in central Kiev on July 3rd and called on "all patriots" from across the country to join tham in the march which is intended to begin the process of "freeing the country of internal and external enemies" and the "anti-Ukrainian regime" of "Poroshenko, Turchynov, Yatsenyuk, and Groisman." They are calling on the Poroshenko regime to nullify the Minsk accords, renew the civil war against Donbass, and carry out a real war against corruption (http://pravyysektor.info/news/marsh-svyatoslava-u-stolnomu-hradi-anons/). Given the summer's kickoff, it appears it will be another long hot summer in Kiev and the rest of what remains of potentially a great country - Ukraine.

[1] Colorados (kolorady) is a deragotory, dehumanizing term that developed during the Maidan revolt used by Ukrainian national chauvinists, ultra-nationalists, and neo-fascists for ethnic Russians, communists, and other opponents of the new order in Ukraine.
~~~~~~~~~~~~~~~~~~~
Gordon M. Hahn is an Analyst and Advisory Board Member of the Geostrategic Forecasting Corporation, Chicago, Illinois; Senior Researcher, Center for Terrorism and Intelligence Studies (CETIS), Akribis Group, San Jose, California Analyst/Consultant, Russia Other Points of View - Russia Media Watch; and Senior Researcher and Adjunct Professor, MonTREP, Monterey, California. Dr Hahn is author of three well-received books, Russia's Revolution From Above (Transaction, 2002), Russia's Islamic Threat (Yale University Press, 2007), which was named an outstanding title of 2007 by Choice magazine, and The 'Caucasus Emirate' Mujahedin: Global Jihadism in Russia's North Caucasus and Beyond (McFarland Publishers, 2014). He also has authored hundreds of articles in scholarly journals and other publications on Russian, Eurasian and international politics and wrote, edited and published the Islam, Islamism, and Politics in Eurasia Report at CSIS from 2010-2013. Dr. Hahn has been a Senior Associate at the Center for Strategic and International Studies (2011-2013) and a Visiting Scholar at both the Hoover Institution and the Kennan Institute.

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 #16
The Vineyard of the Saker
http://thesaker.is
June 22, 2015
Something critical might be happening in the Ukraine

Two small news items have not received much attention recently, and yet they might be the signs of something big happening:

Poroshenko has fired the notorious Head of the equally notorious Security Service of Ukraine or SBU: Valentin Nalivaichenko.

Sergei Ivanov, the powerful Deputy Prime Minister of Russia has stated that the US and Russia have created a bilateral communications channel on the Ukraine run by Victoria Nuland, Assistant Secretary of State for European and Eurasian Affairs, for the USA and Grigorii Karasin, the Deputy Minister of Foreign Affairs, for Russia.  The official reason for that was "not to complicate the already delicate "Normandy-format".

So on one hand, we have Kerry and Nuland who came to Russia and who, by all accounts, got nothing of what the asked for but who are now getting a "communications channel" while at the same time, the 100% USA-controlled Nalivaichenko, who is rumored to be an actual CIA agent recruited many years ago, is booted out by Poroshenko.  Rumor also has it that Arsen Avakov, the Minister of Internal Affairs will be next to be kicked out.

There might be no connection here, but my guess is that there is.

The reason why Nalivaichenko was fired is not so much because of the various corruptions scandals he - and all other junta members - were involved in as much as it is Poroshenko's attempt to place "his" men in all key (power) positions.  That, in turn, shows that his regime is getting weaker, not stronger - hence the need to strengthen and consolidate.

I also believe that the Americans are fully aware of this process and this is why they now want a direct channel of communication with Russia: because they fully realize that the only two powers that matter in reality are the USA and Russia, especially now that events are getting out of control in Kiev.

One of the best Ukraine specialists out there, Ishchenko, is now saying that the US have concluded that the Ukraine is a total mess and that they are now trying to get out at the least possible cost.  I tend to agree with this explanation, though I am not as confident as Ishchenko that we will see this political pullout play out this year already.

Because make no mistake: the 300 million dollars allocated by Congress to arm the Ukraine is a joke. A drop of water into a desert.  It will change *nothing*.  Most of it will be stolen and the rest will be wasted.

The expected Ukronazi attack on Novorussia has not happened either and while the rhetoric in Kiev is more bellicose than ever, and while the Ukronazi forces along the line of contact are constantly shelling Novorussia, no real, full scale, attack has happened.  Could it be that the Ukronazis are truly afraid of the consequences of an always possible Novorussian counter-attack?

It is also becoming increasingly obvious that the US has failed to isolate Russia and that the Russia economy is doing way better than anybody, including the Kremlin, had expected.

So if the Ukronazi Ukraine cannot be used to mount a military attack on Novorussia with the goal of force Russia to intervene, and if the civil war in the Ukraine has failed to produce the kind of isolation and sanctions against Russia which Washington wanted - then what is the use of the Ukraine to Uncle Sam?

Yes, sure, there is the port of Odessa, and some industrial and natural resources which western corporation will be able to acquire for a fraction of its value, but these benefits pale in comparison with the immense costs of somehow tackling the huge economic, social and political problems of the Ukraine.

It will come to that sooner or later anyway.  The USA made an unholy mess of Afghanistan, Yemen, Iraq, Syria, Libya, and they always ended up getting out, at least politically.  Why should it be different for the Ukraine?

I submit that if the US analysts came to the conclusion that there is not hope of forcing Russia to sent her forces into the Donbass then the Ukraine becomes useless.  The chances of Russia doing so appear to be very close to zero right now.  True, there is the very dangerous situation in Transnistria which might, really, force Russia to intervene, but for some reason the USA does not seem to be eager to trigger an immediate crisis.  Could it be that the USA is holding Transnistria as a bargaining chip against Russia in a  "you don't make things too bad for us or else..." kind of strategy?  Maybe.  I honestly don't know.

It will be interesting to see of Avakov get's booted out next and how the various Ukronazi death-squads will react to the firing of their patrons in Kiev.

The Saker

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#17
Gazeta.ru
June 15, 2015
Russian experts eye Moscow's options if USA moves heavy arms to Eastern Europe
Andrey Vinokurov, United States to Move Tanks to Europe. Pentagon Planning to Send Heavy Weaponry to Eastern Europe

The US Defence Department is examining the possibility of sending heavy military hardware to the countries of Eastern Europe. Washington's main task is to demonstrate determination and to reassure NATO's Eastern European partners. If the decision on deliveries is adopted Moscow will have to resort to retaliatory measures, for example to the deployment of Iskander missile systems on the western border, Russian politicians state.

The Pentagon is examining the possibility of sending heavy military hardware to Eastern Europe for the "deterrence of possible Russian aggression," The New York Times reports, citing its sources in the United States and within NATO.

According to the publication's information, the proposal is to send the hardware to Poland, Latvia, Estonia, Lithuania, Romania, and Bulgaria and possibly Hungary and it is designed to be sufficient for 5000 servicemen.

The proposals must be approved by Ashton Carter, head of the US military department, and the White House.

The publication's source also explains that this could happen before the NATO ministers' summit which will take place in Brussels 24-25 June.

The final decision on the deployment of heavy hardware in Europe has not been made, Colonel Steve Warren, the Pentagon's official spokesman, stated to TASS: "In the past few years the US Armed Forces have expanded the scale of the preliminary deployment of equipment for use in the process of training and of holding exercises with their NATO allies and partners.

"The US Armed Forces are continuing to examine the most appropriate locations for the storage of these materials while consulting with their allies. At the present time we have not made a decision on whether this equipment should be deployed and when precisely."

If the decision is made, this will be the first step since the end of the Cold War within the framework of which the United States is going to deploy heavy weapons in the countries of Eastern Europe which used to be in the sphere of the Soviet Union's influence, The New York Times notes.

During the Cold War the numerical strength of the US Armed Forces in Europe amounted to 200,000-300,000 men, Yuriy Rogulev, director of Moscow State University's Roosevelt Foundation for United States Studies, recalls: "Then these were fully staffed combat subunits. But now they number no more than 50,000."

The Pentagon's plans for the deployment of military hardware, in the expert's opinion, should be viewed not as a potential military threat but in the context of the informational and economic pressure on Russia.

In his words, such steps will not improve the "atmosphere" and it will be even harder to reach agreement. "Talks under pressure do not bring any success, as a rule," Rogulev believes.

Fedor Lukyanov, head of the Foreign and Defence Policy Council, believes that what is happening is a change of Washington's foreign policy course.

Although "by real Cold War standards" the stated supply figures are insignificant, they demonstrate a rejection of the policy of the past 20 years aimed at arms reduction.

The expert draws attention to the fact that the deployment of a permanent troop contingent in the countries in question is a violation of the 1997 Russia-NATO Founding Act on Mutual Relations, Cooperation, and Security.

"How this question is going to be resolved is interesting and fundamental," Lukyanov says. It suggests that in addition to a simple rejection of the document's provisions they could try "to creatively rethink" it or not deploy permanent basing units on the aforementioned territories.

One of Washington's main tasks is to reassure NATO's Eastern European members.

According to the findings of a recent Pew Research poll, a majority of citizens in Germany, France, and Italy do not consider it necessary to use military force for the protection of alliance partners in the event of a military conflict. In the Baltic "they are very nervous and are showing them that their security remains important," Lukyanov says.

In his opinion, the implementation of the Pentagon's proposals largely depends on the real financial and economic potential of the United States: "A paradoxical situation is developing. Now, on the one hand, there is a conversation going on in America on increasing the military potential. On the other, there is a discussion on how to reduce expenditure on this sphere." As Lukyanov says, despite the fact that many will recall the Cold War's lessons and the devastating effect of the arms race, Washington's intentions are extremely serious. "We have passed the phase in which Cold War methods were exclusively rhetorical. As for such reports, they will appear increasingly frequently in the future," he predicts.

The United States has determined for itself a "further strategy of the deterrence of Russia and it has a powerful military component." Moscow is not going to disarm on its own, Igor Morozov, a member of the Federation Council Committee for International Affairs, says.

In the senator's opinion, the Russian authorities will be forced to respond to the new challenges by the deployment of Iskander-M missile systems on its western borders and the activation of the submarine fleet in the Pacific and Atlantic oceans.

Leonid Kalashnikov, first deputy chairman of the State Duma Committee for International Affairs, stated to Gazeta.Ru that Russia will have to react to the US actions.

The Iskanders are a response to an antimissile reinforcement and this is inappropriate here, the deputy thinks: "It is senseless to react to tanks by means of missiles. The reinforcement of the groupings that possess this kind of weapon would be a more appropriate action."

Kalashnikov recalls that the United States has not adopted the decision yet so that at the present moment this is a question of an exchange of "informational prodding."

Frants Klintsevich, member of the State Duma Defence Committee, is sure that the United States will deploy some part of its heavy weaponry in Europe: "Separate elements are there already. Now it is simply legalizing its actions."

In the deputy's opinion, there is one calculation underlying such steps - to draw Russia into a "cold war" which will have a negative effect on the economy. As for concrete retaliatory measures, it will be possible to talk about them after Washington's actions become clear.

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 #18
AP
June 21, 2015
US hopes Russia may change direction when Vladimir Putin is gone
US defence secretary Ash Carter speculates that Russia may be more 'forward-looking' after its current president has moved on

US defence secretary Ash Carter said the US and Nato needed a "strong but balanced" approach to Russia, and he questioned whether Moscow's "backward-looking" aggressive behaviour would change while President Vladimir Putin remains at the helm.

Speaking to reporters traveling with him to Europe on Sunday, Carter said he couldn't be certain Putin would change direction, so allies must use a two-pronged approach that works with Russia on some issues while also girding to deter and respond to Moscow's aggression.

"The United States at least continues to hold out the prospect that Russia, maybe not under Vladimir Putin, but maybe sometime in the future, will return to a forward-moving course, rather than a backward-looking course," said Carter, just before arriving in Berlin.

The Pentagon chief, who will attend his first Nato meeting as defence secretary this week, said he wanted to lay out America's balanced approach, which involved bolstering Europe's military ability to deter Russia's military actions. At the same time, allies need Moscow as they fight terrorism and hammer out a nuclear agreement with Iran.

Carter's trip comes as the European Union is expected to extend economic sanctions against Russia until January to keep pressure on Moscow over the conflict in eastern Ukraine. And it follows Putin's announcement that he will add more than 40 new intercontinental ballistic missiles that are capable of piercing any missile defences.

Putin's remarks about the missiles were deemed "nuclear sabre-rattling" by Nato secretary general Jens Stoltenberg. Carter called it inappropriate behaviour.

Carter is expected to give a speech in Berlin, travel to Estonia, and attend a Nato defence ministers' meeting this week.

A key theme at all his stops will be how the United States, Nato and other partners can best deal with the Kremlin in the wake of Moscow's annexation of Ukraine's Crimea region and its military backing of separatists battling Ukraine's government on the eastern border.

But part of the calculus, Carter said, will be a new playbook for Nato that deals with Russia's aggression while also recognising its important role in the nuclear talks with Iran, the fight against Islamic State militants and a peaceful political transition in Syria.

Officials said Carter, who left Washington on Sunday, plans to encourage allied ministers to better work together in countering threats facing Europe. His talks are sure to draw Putin's ire as Moscow chafes under the prospect of continued sanctions.

Carter also intends to talk with his counterparts about a US proposal to send to Eastern Europe enough tanks, Humvees and other military equipment to outfit one brigade.

The equipment would be used for exercises and other training programs, but more importantly would allow a faster Nato response to a crisis in the region. The idea of placing it in Eastern Europe as part of military measures to reassure allies has been under discussion for months; Carter has yet to give his final approval.

Generally, a brigade has roughly 3,500 troops.

Officials have not said where the equipment would go, but there are indications that Poland, which borders Russia, might be one location.

Poland's defence minister, Tomasz Siemoniak, said last week that he has been in talks with Carter about putting the equipment in Poland and in four other eastern Nato nations.

Just two weeks ago, Carter convened a meeting of American defence and diplomatic leaders from across Europe, and concluded that the US needed to strengthen its military exercises and training with nations in the region and bolster Nato's intelligence-sharing to better counter Russia.

He also acknowledged that the current international economic penalties against Russia have not stopped Moscow's military support for separatists in Ukraine. He said that the US and allies worry that Russia may use similar tactics and aggression against other nations in the region.

Western leaders say Moscow is supplying the rebels with manpower and powerful weapons, and have detailed Russian troop movements along Ukraine's eastern border, including convoys of supplies, troops and weapons moving to bolster the separatists. Russia rejects those claims as unfounded.

A fragile cease fire in Ukraine that was worked out in February has been broken repeatedly, and each side blames the other for the spikes in violence.

At an investment conference on Friday in Russia, Putin blamed the US and the European Union for triggering the Ukrainian crisis by refusing to take into account what he described as Russia's legitimate interests.

"They have pushed us back to the line beyond which we can't retreat," he said. "Russia isn't seeking hegemony or some ephemeral superpower status."

While Russia may dominate much of the talks, the allies also will discuss how Nato can provide more assistance to Iraq, including plans to involve the alliance more officially in the fight against Islamic State militants.

According to US officials, Nato leaders will consider providing ministry-level advice and other training assistance in Iraq, with a possible decision approving the plan expected around July.

Some allies are participating individually in the fight against Isis, but Nato has not agreed on how it should weigh in as an alliance.

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 #19
US Department of Defense
June 21, 2015
Media Availability with Secretary Carter En Route to Berlin, Germany
Presenter: Secretary of Defense Ash Carter

SECRETARY OF DEFENSE ASHTON CARTER: So the purpose of this trip, the focus of it, this particular trip to Europe, is NATO. And as to take it from the top again, we'll be going now to Germany, and talking about -- to the German defense minister and other officials there, particularly about the strong and forward-looking role that Germany is taking in Europe these days.

It's obviously one that's very welcome by the -- to the United States, and one that we're partnering with them in. Then to a few stops that signify the new playbook in effect that NATO is devising to deal with its two principal challenges today, that it has identified.

This, again, the NATO that took us through the Cold War. The NATO that dealt with the Balkan situation, the NATO that participated with us in Afghanistan, lots of other places now looking to its future, and to two challenges that are rather different, but coincided in time, and that both need to be dealt with at the same time.

Namely, to Europe's southern and southeastern flank, the dangers that begin with extremism in the Middle East and lead to both terrorist threats and also people displaced from and seeking refuge in Europe from ungoverned or poorly governed parts of North Africa and elsewhere. And, of course, the Russia of Vladimir Putin.

And in both of those areas NATO needs to and is adapting. These are challenges that are different in kind from the old Fulda Gap Cold War challenge. They're different in their own ways from Afghanistan and the kinds of things that we've been doing there.

So it's new but NATO being NATO and always adaptive, is adapting for both of them.

In particular, since I'll be going to Estonia as well as Germany and Belgium. Russia will be a focus of the trip, and also of those aspects of NATO's new playbook that are particularly intended to deal with Russia's aggressive behavior to-date, and the need to have a strong but balanced approach.

And I'm going to be sharing with leaders I meet with there, the American approach to dealing with Russia. They are always interested in that, which is a strategic approach to Russia that is strong, but also balanced.

And I'll explain what that means. It's strong, in the sense that we are cognizant of the needs to deter and be prepared to respond to Russian aggression, if it occurs, around the world, but also especially in NATO and with NATO.

And preparing that deterrent and response capability with respect to NATO is what the new playbook is about. And you'll get to see parts of that, the Very High Readiness Task Force preparations and other elements of that in the course of the next few days.

And another part of that is helping the states, both NATO members and non-NATO members, at the periphery of Russia, or surrounding Russia, to harden themselves to malign influence or destabilization of the kind that Russia has fomented in eastern Ukraine. And that's important too.

And then to get to the balanced part, the United States continues to work with Russia on those issues, and there are some, the P5+1 negotiations is one, countering terrorism is another, where Russia's leaders do understand and perceive that their interests in the long run are really aligned with ours.

And that in those respects, it's important for them -- they do recognize that they should be moving forward in time with us, and the rest of the world, and not backward in time all alone, which is the tendency that we regret very much, but also is the reason to be strong prepared.

And also on that latter note, in addition to working with them where they today understand that their interests align with the future and with the rest of -- marching forward, so to speak, with the rest of the world, the United States, at least, continues to hold out the prospect that Russia, maybe not under Vladimir Putin, but maybe some time in the future, will return to a forward-moving course rather than a backward-looking course.

And I can't say whether or when that will occur. But it is the U.S. intention to keep the door open for that. We've seen that before in the past. I remember being at Fort Riley, Kansas, 20 years ago, discussing joint activity -- joint deployments into Bosnia with the Russians, where they actually operated with, next to, and together with NATO to meet a European contingency.

That was forward motion by Russia. So I've seen Russia try to act forward in history rather than act backward in history. And I think we still remain open to that. But whether Russia, whether President Putin will move in that direction, I can't say.

But anyway, we do try to have a balanced approach with respect to Russia. And laying out that strategic approach for our friends and allies is something I'll be prepared to do on this trip.

And that I think it's important to do in view of the concerning behavior by Russia, which is concerning to all of Europe, both NATO and non-NATO.

And with that, we'll open up for questions.

STAFF: Great. Thank you
.
If you could remember to give your name and outlet, especially because we have a couple of new folks with us on this trip. So, questions?

Lita?

Q: Lita Baldor with the AP.

Mr. Secretary, you talked a little bit the last time we saw you about Russia, just after you had that summit. And you talked about the need to adapt and NATO needing to adapt.
And I'm wondering particularly with your comments now about Russia and with or without Putin needing to change, do you believe that change in Russia will only come without Vladimir Putin at the head?

And do you think that this adapting, does this mean acceptance of what Russia is doing at this point? Or does there have to be more tangible consequences?

SEC. CARTER: Well, the adaptations I was talking about are specifically in anticipation that Russia might not change under Vladimir Putin or even thereafter. So the adaptations I'm talking about are to the alliance's capabilities to deter and respond.

That's what the Very High Readiness Task Force is about. That's what this concept of agility and how we train and operate -- it goes to the countering hybrid warfare of the kind I was talking about both in -- which actually applies not just to NATO countries, but around Russia's periphery and other areas like cyber.

So all the ways that the adaption of NATO is taking place in anticipation that that may not change.

Now you asked, do I expect it to change? I certainly would hope that under President Putin, who will be the leader of that country for some time in their system, or perhaps later, that Russia will -- and the Russian people will recognize that going backward in time is not good for Russia, and will once again try to move forward as a respected and strong but rule-abiding member of the international community, solving problems that are common and not creating problems.

But I can't be sure, Lita, that that will occur. And that's why we have this balanced approach, which leaves open that possibility and makes it clear to the Russian people, at least, as well as the Russian leadership that that still is our preference, and actually our belief that that's what's best for the Russian people.

But at the same time, we need to be prepared to have deterrence and response capabilities.

Q: Thank you. Margaret Brennan, from CBS News.

Vladimir Putin this week said he was adding ICBMs, about 40 of them, to the nuclear arsenal. Can you give us some perspective on whether you think that is posturing? Do you take him at his word?

And can you explain why we're not going to Ukraine, since that's sort of ground zero for the sort of activity you're describing?

SEC. CARTER: Well, the Ukraine part, I just didn't have time on this trip. This is a NATO-focused trip.

I will be seeing the Ukrainian defense minister, who will be coming to the NATO ministerial. And actually there's a meeting that coincides with my being there and I'll attend part of, of the NATO-Ukraine council, which was established -- I was actually part of this also long ago.

So we will be meeting there as well. And I'm sure a lot of the discussion will be around Ukraine.

Of course, the main event about -- regarding Ukraine this week is not about us or about NATO, it's about the E.U. and sanctions. And that will be the principal development with respect to Ukraine next -- this coming week.

With respect to Putin's comments about nuclear weapons, the only thing I'd say about that is that I think you used the word "posturing," but nuclear weapons are not something that should be the subject of loose rhetoric by world leadership.

We all understand the gravity of nuclear dangers. We all understand that Russia is a long-established nuclear power. There's no need for Vladimir Putin to make that point.

And so I obviously can't explain for you why he would posture in that way, but it's not appropriate behavior, in my judgment, for leaders to be speaking that way about something as grave as nuclear weapons and their nuclear responsibilities as responsible and longstanding nuclear powers.

STAFF: Phil?

Q: Phil Stewart from Reuters. Thanks, Mr. Secretary, for doing this.

I want to push you a little bit on that last comment on Putin, and your earlier comments that change may not happen under Putin. Could you -- you say he shouldn't use that rhetoric, but he is using that rhetoric.

You know, NATO is posturing in a way that is meant to deter, him but he doesn't sound like he's being deterred. It sounds like he's ramping up his rhetoric. And it sounds like he's ready to match NATO with whatever steps it takes.

And I'm wondering, do you think that Putin is ready to keep escalating? Do you think NATO is ready to keep pace with that? Thank you.

SEC. CARTER: Well, again, this is as before, I can't speak for Vladimir Putin, I can only speak for what we're doing, which is where we continue to deter, to have a strong deterrent, and prepare to respond.

Nothing that the United States or NATO is doing is causing the behavior you're referring to. As I said earlier, I can't say when or if Russian policy will change, but our policy is quite clear, which is we are going to continue to deter and prepare to respond. And we'll continue to adapt those preparations so that they remain a strong deterrent to Russia.

Q: David Lynch with Bloomberg.

Mr. Secretary, I'm curious, given some of your phrasing about Mr. Putin and the fact that you had long experience in and out of the Pentagon during the Cold War, how you'd compare the challenge of deterring Putin's Russia to the Cold War-era challenge.

How different is it? And is it easier, harder? And what is this new -- how different is the new playbook, I guess?

SEC. CARTER: Well, that's a very good question. And the new playbook is to respond to the new security situation in Europe, including the situation opposed by Russian -- Russia's own behavior.

And that's why -- and so it's not like it was in the old days. We are looking at NATO responses that are much more mobile, much more agile, able to respond on short time lines, because that's how events today unfold, unlike a quarter let alone a half a century ago.

That's why we're attentive to the hybrid aspects of potential contingencies. Hybrid meaning -- I assume you know what the expression means. But so paying attention hybrid warfare, and the ability to deter that.
And, also I said earlier, to harden our friends and allies against subversive or malign influence. That's an important part of it. And then there are new domains like cyber and so forth that certainly were not part of things back in the Cold War.

So all of this is a very different playbook. And that's why NATO is, as always, adapting its playbook.

Q: Just a quick follow. Do you consider him a rational actor?

SEC. CARTER: I have no particular insight into Vladimir Putin. I always take the leaders of other countries to be -- I observe their behavior, what they say. He's quite clear in what he says. He leaves you no doubt about his views.

And as I said earlier, one of his stated views is a longing for the past. And I -- that's where, you know, we have a different perspective on the world. And even on Russia's future, we would like to see us all moving forward, Europe moving forward.

And that does not seem to be his stated perspective. So we look at what he says, very importantly, at what he does.

STAFF: We have a couple of things we have to get done with the secretary here with 90 minutes left in the flight. So time for two more.

We'll go, you two.

Q: Hi. Gordon Lubold with The Wall Street Journal.

Mr. Secretary, you mentioned two weeks some of the things that you would like to see happen with NATO to counter the behavior, you know, more intel-sharing, more exercises, that kind of thing. Do you expect that to take any more form here this week while you're visiting?

But also, how do you characterize -- how do you assess the risk the U.S. takes and NATO takes in kind of coordinating this military resolve and not potentially getting into a situation with Russia that you are seeking obviously to avoid?

SEC. CARTER: Well, with respect to the first point, the answer to that is, yes, you will see that what I'm calling the new playbook is exactly a topic of the NATO ministerial. And so very much a focus of this week.

With respect to the second part of your question, Gordon, I'm not quite sure I caught the drift of that one.

Q: Sure. I guess I'm just wondering, as you kind of attempt to coordinate military assurances here in the region to give other countries the confidence to respond, how do you make sure you're not pushing him, Mr. Putin too far to get into something you're to avoid?

SEC. CARTER: Well, a couple of things. One is that, as I mentioned earlier, our policy and posture is a balanced one. And it continues to offer to Vladimir Putin's Russia the possibility of greater cooperation.

But the other thing I'd say is -- I mean, obviously I'm going to a defense ministerial as a defense minister. But the main event -- in Russia's relations with Europe, the main events are economic and political, not just military.

So those are dimensions of the relationship. And I think dimensions in which Russia is heading backwards is detrimental to the Russian people that are not -- don't have anything to do with military activities on the part of the United States or NATO.

Although, as I said, they are adapting to be firm deterrents and an ability to respond. But there are these other dimensions to the policy, and really, other dimensions to taking Russia backward.

And those are the dimensions that are so regrettable, I think, for the Russian people -- or will be in the long run. And, of course, that's a real focus of activity, not U.S. activity per se, but of E.U. activity this week.

STAFF: This will be our last question.

Q: Thomas Gibbons-Neff from The Washington Post.

You were talking about the task force, the Spearhead Task Force's participation kind of dealing with countering hybrid warfare. And you were talking about these border states that are kind of hardening themselves to subversion near Russia.

And that kind of brings to mind Crimea and, you know, what happened there with the little green men, no patches on their uniforms. Do you think that the task force or any kind of -- do you think that there is a military solution to a situation like Crimea?

SEC. CARTER: Well, nothing has changed in terms of our view of Crimea. It was the annexation of a piece of another sovereign -- of a neighboring country's sovereign territory, which goes against all of the rules of international law, plain and simple.

I think what you're getting at is, is part of adaption of our posture, U.S. posture, but also as I said, the NATO playbook, one that anticipates, you mentioned little green men. I think you're getting into the concept of hybrid warfare.

And very definitely it is. That's one, not the only, but one of the dimensions of our adaption, but very importantly also of countries that are surrounding Russia that don't want to be susceptible to the kind of thing that happened in Crimea.

STAFF: Okay. Thank you, guys. If you have any other follow-up questions, please grab me or Eileen, and we'll be talking to you many more times over the next five days.
Thanks, guys.

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 #20
Russia Direct
www.russia-direct.org
June 22, 2014
Russia and the West: The muscle flexing is leading nowhere fast
Experts at the GLOBSEC 2015 conference are concerned that the crumbling architecture of Euro-Atlantic security post-Ukraine is pushing nuclear conflict to the fore.
By Ivan Timofeev
Ivan Timofeev, Ph.D. in Political Science, Program Director at Russian International Affairs Council.

The international security conference GLOBSEC 2015 in Bratislava that took place between June 19-21 is considered by many to be a kind of "Central European Munich." In attendance are presidents, prime ministers and foreign ministers from across Central and Eastern Europe.

Also taking part are high-ranking officials from the U.S. State Department and the European Commission, as well as the heads of large defense companies, top international affairs experts and journalists.

Russia-West relations are the leitmotif of the forum. As expected, criticism of Russia is not in short supply. However, it is no longer 2014, when the political changes in the region were nigh on catastrophic.

The first impression from the 2015 meeting is that the acute phase is over. The state of relations is dramatically serious but stable. The question is: Where will this stability lead? Down the path of compromise, or towards new regional and global upheavals?

Is the acute phase of the crisis really behind us?

In the post-Soviet quarter-century, we have developed a fear of crises. And not without reason. But a crisis is just a transition from one state to another, ultimately leading to a smoother trajectory - or greater turmoil. Either outcome can be a means to a

Today the intensity of relations between Russia and the West has abated somewhat. The conflict in Ukraine is now one of arguing over positions, and outwardly the situation in Russia itself looks more stable than it did six months ago. The acute phase of the crisis seems to be over.

However, the fundamental issues encircling Russia's relations with the West have not been resolved. Neither have the complexities of the country's general economic development. Slowly but surely, the antagonisms are accumulating irreversibly. And that means that new problems are simply a matter of time.

A total loss of trust now characterizes Russia-West relations

A qualitatively new element has appeared in relations between Russia and the West - a total loss of mutual trust. The problems of trust have been a mantra of politicians and experts over the entire post-Soviet period. Now the matter has been wrapped up conclusively.

In the absence of trust, there are no problems with trust itself. The problem is finding it. Strategically, neither the West nor Russia considers each other as reliable partners.
"Danger," "challenge" and "threat" are the standard buzzwords in the political lexicon on both sides. This atmosphere has permeated business projects and everyday contacts. The rift that began as political is becoming economic and even socio-economic.

The new Euro-Atlantic security arrangement

Along with the political relationship, the whole architecture of Euro-Atlantic security is crumbling too. It is no laughing matter and concerns everyone. What on earth is happening?

It began first of all with the gradual erosion of the basic treaties on nuclear arms reduction, specifically the Intermediate and Shorter-Range Nuclear Forces (INF) and Strategic Arms Reduction (START) treaties.

The matter is no longer confined to the standard political rhetoric. The INF Treaty was cited in the Ukraine Freedom Support Act, signed into law last year in the United States.

START appeared in a recent amendment to the law on U.S. defense outlays, linking the financing of obligations on reducing offensive arms to Russia's respect for Ukrainian sovereignty.

Nothing tragic has come of it so far - both treaties remain in force. But for the first time in three decades, an inherently local crisis is having a direct impact on the global security architecture.

Even before the Ukraine crisis, Russia and the United States were divided on a host of local issues. But they were all discussed separately from the basic treaties on nuclear weapons. That informal procedure has been violated.

As a result, we are sleepwalking towards the dismantlement of the system of Euro-Atlantic security laid down by the Soviet Union and the United States. One can argue long and hard about who threw the first stone. That's not what's important.

In the medium term we will see a new nuclear arms race, in which regard the issues of conventional weapons, the militarization of space and the growing competition in cyberspace are interrelated.

The erosion of Euro-Atlantic security and its consequences

The European region is rapidly becoming less secure. The Ukraine conflict is only the visible part of the process; the long-term trend has far more destructive potential. We are heading towards a situation in which nuclear conflict is being pushed to the fore, acquiring clear contours in the process.

No one wants it, of course. But the safety cables holding us above the precipice are becoming weaker. And there is insufficient desire and trust to pilot a new system of security.
The implications of a new arms race for the United States

A new arms race would have economic repercussions. For both sides. After the acute financial crisis of 2008-2009, neither Russia nor the West is in the best shape for costly military-political adventurism.

The problems of the West are more visible - bad debt in the private sector (the U.S. subprime mortgage market was the most obvious example) quickly spread to the entire global financial system. But it didn't stop there. It also significantly undermined the public finances of many countries around the globe.

If further proof is needed, a quick glance at the IMF's own data will provide it. Average GDP growth in the developed world hovered around the zero mark in 2008, before plummeting almost 3.5 percent in 2009. Today's figures still lag way behind pre-crisis growth levels. For instance, the euro zone, Russia's main trading partner, last year grew by less than 1 percent.

Since 2007 the debt burden of developed countries has risen from an average of around 72 percent of GDP to nearly 105 percent. In the same period the debt-to-GDP ratio among the G7 countries has increased from 81 percent to 118 percent of GDP, and in the euro zone from 65 percent to 94 percent of GDP.

The problems of developed countries lie on the surface. No sooner has a glimmer of economic hope pierced the darkness than state intervention is again called for. And not to improve the economic data. The money is needed for defense, and the costs could well hurt some already weakened economies.

Moreover, the crisis has significantly reduced the resources available, which are a far cry from what they were seven years ago. And even back then, by no means all countries could afford large-scale expenditure of such kind.

The implications for Europe

This is very visibly the case in Europe, where the economic lie of the land is extremely varied. Whereas Germany's national debt is only 73 percent of GDP (an increase of 10 percentage points from 2007), Britain's is 90 percent, France's 95 percent, Spain's 98 percent, Italy's 132 percent and Greece's 177 percent.

In the case of Greece, the government's thoughts are a long way from military spending, as can seen from the news, and it is a fair assumption that other quite large countries are also trying to tighten their belts.

Russia's development model is used up

Russia seemed to have successfully overcome the first phase of the crisis. Until recently the situation was not too bad.

The recession of 2009 could not be avoided, of course, but debt rose only very slightly, and the country's reserves remained intact and even grew nicely in 2010-2012. In 2015, however, the economy is not suffering from a mere recession. In addition to a sharp drop in commodity prices, many internal processes have stopped supporting growth, and business does not see new prospects or sources of development.

Starting 2012, per capita consumption (the key indicator for the bulk of Russian businesses) was fueled mostly by credit. Its potential has now been exhausted. As a result, total net outflow of capital since the beginning of 2008 significantly exceeds $600 billion, while domestic demand has nosedived.

The details are complex, but the general outline simple: Russia's development model is used up and needs to be replaced. Without a fresh approach to the economic challenges at both the public and private level, growth may not return for a long time to come.

What are the options available?

The bottom line is that instead of recovering their losses from the crisis and focusing on development, while ensuring a safe and secure environment, which could help pull investment away from other regions (Southeast Asia, for example), Russia and the West are creating the conditions for a further deterioration in their own and neighboring economies.

As a result, Europe's appeal is waning. It will continue to lose out to more successful economic competitors. Suffice it to look at how GDP per capita has grown in China, the engine of the Asian economy, since 2007 to understand that even without political confrontation the countries of Europe are facing development problems.

According to the IMF, in 2007 Russia's GDP per capita was almost 3.5 times larger than China's. By the end of 2015 they will be equal, while in the same period the gap with Germany (the euro zone's current leader) will be reduced threefold, and with Greece more than fourfold.

What's more, Russia could well end up being the weakest link in the race. Its economy is far less diversified than its main opponents and far less focused on efficiency, and given the current state of the commodity markets, external demand cannot be relied upon to balance the books.

The question arises as to what should be done. The answer is clear: Both Russia and the West (especially the EU) need to concentrate on economic development instead of wasting limited resources on muscle flexing.

Engaged in direct confrontation, as the two sides are, neither can easily remain in isolation, hence the response must be joint. If not, our competitive positions will be further eroded. And that is in the best case.

In the worst, we will add the rising risk of full-scale armed conflict to our list of woes.

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 #21
The National Interest
June 22, 2015
The Agreement That Will Save Ukraine
Here's how the West and Russia might be able to peacefully resolve the crisis in Ukraine.
By Noel Anderson
Noel Anderson is a PhD Candidate at the Massachusetts Institute of Technology and an affiliate of the MIT Security Studies Program. His dissertation examines competitive intervention and its consequences for civil wars.

Despite the Minsk-II ceasefire agreement signed in February, the civil war currently being waged in eastern Ukraine between government forces and separatist rebels is all but frozen. In a pattern akin to the gradual collapse of the earlier Minsk-I Protocol, small-scale skirmishes have been frequent occurrences over the past five months, while more-recent battles foreshadow a return to larger, conventional military confrontations.

For those caught in the crossfire, the costs of the fighting continue to mount. To date, the conflict has claimed over 6,300 lives, wounded over 15,500 and displaced over 1.7 million people. The Ukrainian economy isn't doing well, industrial production is collapsing and the value of the hryvnia has plummeted.

And yet, the war continues. Subsidized by the largess of foreign powers, the flames of civil war still burn. The United States and the European Union promised billions in aid to Kiev, committed military advisers and "nonlethal" aid to government forces and boosted NATO's military presence in Eastern Europe. Meanwhile, Russia arms separatist rebels, mobilizes its forces on the Russia-Ukraine border and deploys Russian "volunteers" in eastern Ukraine.

These foreign investments in Ukraine's internal war are motivated by larger geopolitical interests. For Moscow, Ukraine is a critical buffer-state separating the Russian homeland from NATO encroachment; the Black Sea Fleet-Russia's means of projecting power in the Mediterranean-is based in Sevastopol; and control over Ukrainian pipelines is critical for Russian energy exports, on which the Russian economy relies. For Europe and the United States, a pro-Western Ukraine would represent the geopolitical containment of an increasingly assertive Russia. A consolidated Kiev could serve as an instrument for exerting pressure on Moscow. A government victory over Russian-backed separatists, however unlikely, would provide an important ideological victory for liberal democracy.

To be sure, these are important geopolitical interests for both sides. However, they are instrumental rather than intrinsic interests-they are means to ends rather than ends in and of themselves. The outcome of the Ukraine conflict does not pose an existential threat to Russia or the West, and consequently, there are limits to the costs these external actors are willing to pay to see their respective sides through to victory. While the conflict may warrant investment in the form of arms, equipment and financial aid, external interveners have never entertained the prospect of fighting a war against each other in the name of Luhansk or Donetsk.

Nonetheless, mounting tensions have given rise to mounting fears of escalation. In recent comments to the Russian news agency Interfax, former Soviet leader Mikhail Gorbachev registered his concern that the conflict in Ukraine might spark a larger "hot war" between the United States and Russia. "Unfortunately I cannot say for sure that a cold war won't lead to a 'hot' one," Mr. Gorbachev explained. "I fear they could take the risk."

Gorbachev's concerns have been echoed by former U.S. secretary of state Henry Kissinger. Testifying during a Senate Armed Services Committee hearing, Kissinger expressed his uneasiness about the prospect of "a process of military engagement without knowing where it will lead us and what we'll do to sustain it."

Both Gorbachev's and Kissinger's remarks reflect the strategic dilemma that underlies the West's and Russia's "competitive intervention" in Ukraine; the two sides have conflicting interests over the outcome of the civil war, but they have a common interest in the avoidance of direct confrontation. While the West and Russia are compelled to intervene, they are also simultaneously-and paradoxically-compelled to do so with restraint.

That both sides seek to regulate their competition and control escalation can be observed in the relatively reserved-and arguably somewhat strange-intervention strategies adopted by both sides. For example, the United States has already provided Kiev with over $100 million in "nonlethal defensive security assistance," including armored Humvees, unarmed drones, and counter-mortar radars, and has deployed hundreds of U.S. advisers to train Ukrainian government troops that will eventually be sent to the front lines of the war. Yet to date, President Obama has been unwilling to provide the Ukrainian government with the weapons it has long requested. Concerns that transferring American-made arms might further provoke Russia and escalate the fighting has necessitated a more careful approach-one that signals restraint by drawing distinctions between "lethal" and "nonlethal" military aid and between "advisers" and "combat troops."

Likewise, Russia's deployment of "little green men"-seemingly professional soldiers in Russian-style combat uniforms with Russian weapons but without identifying insignia-and insistence that Russian soldiers fighting in eastern Ukraine are "volunteers" on "holiday" provides a means to annex and occupy Ukrainian territory while controlling escalation. The need to maintain plausible deniability for these foreign interlopers has required Russia to limit the scope of its invasion. It also provides the essential space needed for the West to save face and avoid a forceful counteraction that could spark a wider war with Russia.

The restraint of both the West and Russia is wise, but it is agonizing. It amounts to an intervention on the part of Russia that sustains the rebel insurgency rather than propels it to victory, and a corresponding intervention by the West that prevents the dislodging of government forces from eastern Ukraine rather than ends the civil war. For external actors, "not losing" has become more important than "winning": neither side is willing to pay for victory, yet neither side is willing to concede defeat.

The implications for Ukraine's domestic combatants are significant. As long as external actors subsidize the internal conflict, neither the government nor the rebels are compelled to negotiate an end to armed hostilities. Yet precisely because their external backers seek to control escalation, neither side enjoys a decisive military advantage that can serve to win the civil war. The net result is a protracted internal conflict with little hope for compromise or resolution.

Consequently, solving the strategic dilemma that competitive intervention entails is a necessary prerequisite to the termination of the conflict. That means that efforts to end Ukraine's civil war must begin with an external agreement between interveners-one that goes beyond internal ceasefire agreements like Minsk I and II by explicitly acknowledging both the West and Russia's legitimate interests in the outcome of the conflict. Such an agreement will require compromise from both sides, including a recognition that Ukraine can be neither a satellite of the Russian Federation, nor a protectorate of the West. It will also require a commitment to end provocative military posturing across Eastern Europe and to cease the flow of military assistance-both "lethal" and "nonlethal," "volunteered" and "deployed"-to Ukraine's domestic combatants.

It is only when external powers end their meddling in Ukraine that an internal settlement to the conflict will be possible. Until that time comes, the strategic dilemma inherent in competitive intervention will continue to fan the flames of war.

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#22
The American Conservative
www.theamericanconservative.com
June 19, 2015
The Varieties of Russian Conservatism
A staunchly traditional society grapples with modernity's disruptions, seeking conservatisms far beyond Putinism.
By PAUL GRENIER
Paul Grenier is an essayist and translator who writes regularly on political-philosophical issues.

It's a truism that America is a liberal place. Americans emphasize the importance of the individual and tend to reject notions of hierarchy and authority. Russia by contrast is known to be a more conservative society, one where the interests of the group come ahead of those of the individual; and where, for centuries, respect for hierarchy and authority has usually been the norm.

All the same, the "news" of Russia's return to conservatism has hit many observers in the West like the proverbial ton of bricks. The typical response has been to blame the Russian president for steering Russia away from the liberal path, the path of becoming a "normal country" with "Western values."

Others have sought to understand Russian political culture on its own terms. A recent analysis ("The New Eurasians," Times Literary Supplement, May 13, 2015) stands out from the crowd by making a serious effort to read present-day Russian conservatism in its historical context. Lesley Chamberlain dismisses the glib reduction of Russia to its present-day leader. Russia, she writes, is not ruled by Vladimir Putin: to the contrary, "the power that rules Russia is tradition." Far from it being the case that a benighted Russian public is being led to conservatism artificially by its government, the reverse is the case: the vast majority of Russians, perhaps eighty percent "are intensely conservative."

Like most in the commentariat, Chamberlain finds cause for alarm in Russia's return to type. She worries about a Russia seeking to create "an alternative version of the contemporary Christian, or post-Christian, world, contiguous with but distinct from the West."

Chamberlain reduces today's incarnation of Russian conservatism to the more or less vague bundle of geographic and neo-imperial notions that goes by the name Eurasianism, often linked with the name of Alexander Dugin.

To be sure, anti-Western Eurasianism is part of contemporary Russian conservatism. But it is only one part. Excessive focus on this angle has created the impression that Dugin-esque Eurasianism is the only game in town when it comes to Russian conservatism. It isn't. It's not even the only version of what might be called the 'Russian national greatness' school of conservatism.

If we wish to understand Russia in something like its true complexity, we have to take the trouble to listen to it, to let it speak in its own voice instead of constantly projecting onto it all our own worst fears. Precisely because Eurasianism has already hogged all the attention, I won't deal with it here.

Instead, it's time to take a look at the varieties of Russian conservatism. This April, I got the opportunity to do so at a conference held in Kaliningrad: "Berdyaev Readings", a three-day gathering of academics and writers in Russia's most westerly province sandwiched between Poland and Lithuania, devoted to "the dialogue on values between Russia and the West."

Talking to the Conservatives

I was initially nervous about accepting the invitation. A long-time student of Russian political and religious thought, I was naturally attracted to a gathering named in honor of the great Russian existentialist and personalist philosopher Nicholas Berdyaev. The conference's ethical theme was at once vague and alluring. Were Russian writers and academics truly interested in reading the likes of Berdyaev, I wondered, or might Berdyaev merely serve as the cover for a repugnant reactionary ideology expediently cooked up by the Kremlin?

What if the so-called "conservatism" at this conference turned out to be-as critics have alleged such gatherings in Russia always are-nothing but an anti-Western hate fest tinged with racism and bigotry? Well, I figured, that would also be something worth learning.

The third in the "Berdyaev Readings" series, the conference is just one part of a larger project funded by the Institute for Socio-Economic and Political Research (ISEPR), a Moscow think tank linked with the United Russia party and allied with several leading Russian universities and philosophy departments. As already suggested by the name of its flagship publication (The Russian Idea, "Русская idea"), the project's overarching goal appears to be putting conservative flesh on the bones of what Chamberlain charily described as "the true Russian way in all things ... social, political and religious."

Though I definitely continue to have misgivings about aspects of the Russian conservative movement, I found the conference entirely worthwhile and at times even inspiring.

Commonalities

Despite important differences among the Russian participants, there was a unity of perspective in at least one respect: all accepted the value for today of the inheritance of pre-1917 Russia. This held true even for the most liberal-oriented participants, such as Boris Makarenko, a professor at the Higher School of Economics. No less than his more conservative colleagues, he saw strong family values, and traditional morality and sexual ethics as one of Russia's strengths. Indeed, Mararenko warned that the relative strength of these values today in Russia is by no means a guarantee of their stability, and the same goes for the current continuing growth of the Orthodox Church. The danger to traditional Russian values, he warned, comes not from the West but from the pressures of modernization itself.

Also common to all participants was a readiness to learn from the experience and thought of the West, albeit on their own terms. Makarenko compared Russian conservatism with Western mainstream conservatism (such as that in the Republican Party in the U.S.), and generally found the Russian version the less impressive of the two. Western thinkers cited approvingly by participants included Tocqueville, Hans Gadamer, Max Weber, Martin Heidegger, Isaiah Berlin, and James Billington, among many others.

Oleg Matveichev, a professor of philosophy at the Higher School of Economics, spoke mainly on the subject of Berdyaev, whom he deemed a "liberal" conservative, because Berdyaev gives so much importance to the individual person (as opposed to the group). In a separate collection of essays which he shared with me, Matveichev makes very clear that Russia itself is simply a subset of Europe; it is a country that can only define itself in terms of its relationship with Europe. Despite the supposed popularity of a Eurasianist discourse, most other participants agreed that Russia is a European nation. However, several (but not Matveichev) also believed that Europe, having recently abandoned its Christian heritage, had abandoned its own essence.

The Russian thinkers most frequently cited included, unsurprisingly, Berdyaev, but also the pro-Catholic (and rather Kantian) Russian philosopher Vladimir Solovyov (see my recent essay for a brief overview of their thought).

Liberal Conservatism

Some participants straddled several categories of conservatism at once. In other cases, for example that of the above-mentioned Makarenko, their thought fit neatly within a single category-in his case, that of liberal conservatism.

For Makarenko, modern Russian political practice has far too utilitarian an attitude toward rule of law and democracy. If it can be demonstrated that the latter support state sovereignty, then all is well and good; but whenever either are perceived as a threat to the state-then democracy and rule of law are always the ones that have to suffer. From his perspective, Russia would do better to learn from Burke, who looked not so much to the sovereignty of the state as to the sovereignty of the parliament.

Matveichev, no doubt the most eclectic thinker in the group, on certain subjects occupied the liberal end of the spectrum. For example, in an essay on corruption and the state, he approvingly cites the work of Peruvian economist Hernando de Soto to make the point that rule of law-as it is practiced, nota bene, in the United States-is the sine qua non of economic prosperity. What I found fascinating about Matveichev's position is that he then takes his argument in a Hegelian and Platonic direction.

It is the state-not the market on its own-that provides these all important forms, and bad as the corruption of state institutions may be, a bad form is nonetheless better than no form at all-including for business. The common good "cannot be reduced to the goods of individual private parties, and cannot be deduced from them. Just as the sum of the parts does not make up the whole, in the same way the sum of private interests may sometimes work even against itself ... it is the state that represents the common good." Isn't this something we can learn from in the West today?

Left Conservatism

The "left conservatives" at the conference-represented most prominently by Dr. Alexander Schipkov, an expert on Church-state relations-are critical of liberal capitalism and indeed are also critical of the current Russian state to the extent that its "conservatism" is reducible merely to "family values" without including the all-important component of economic fairness. His views are close to that of Catholic Distributists as well as to those of "radical orthodox" theologians like William Cavanaugh and John Milbank.

According to Schipkov, Russians of various backgrounds (left and right, secular and religious, red and white) need to forge a common ethic. But in truth, Russia already has such an ethic, one that unifies all the disparate phases in its often tragic and contradictory history. Consciously playing off of Weber, Schipkov refers to Russia's "[Christian] Orthodox spirit and the ethic of solidarity." In a fascinating essay on this same subject, Schipkov makes clear that his concept of solidarity owes much to the writings of the early 20th century German philosopher Max Scheler, who likewise had such a big impact on the thought of Pope John Paul II.

Though the Russian Church continues to play a defining role in the ethical formation of the nation-no other pre-1917 institution, after all, still exists-over time it will be replaced by other institutions, according to Schipkov. Like the Catholic Church, the Russian Orthodox Church has recently forged its own Social Concept of the ROC, which fleshes out this call for fairness as an aspect of human dignity.

Creative Conservatism

Because it tends to evoke the disastrous social and economic effects of "liberalisation" during the 1990s, the term "liberal" has become something of a swear word in today's Russia. But what, exactly, does this much reviled "liberalism" consist in? In my own presentation (English translation forthcoming at SolidarityHall.org) I suggested that Russians need to define liberalism-and conservatism-more carefully, while distinguishing both from their ideological perversions.

To his credit, Oleg Matveichev has taken the trouble to craft a precise definition of the liberal doctrine of human nature in terms worthy of a Pierre Manent (The City of Man). According to Matveichev, liberalism reconceives the very essence of man as freedom, self-sufficiency, and self-definition. Seen through this liberal prism, the goal of our existence becomes self-emancipation from the chains of the past and the dead weight of tradition.

Having redefined the meaning of history, Matveichev continues, the "liberals" then set about condemning those who would thwart its "progress," dismissing them as "conservatives" and "reactionaries." Is it not time, Matveichev asks, to throw off the chains of this label invented for us by our adversaries? Why define ourselves as mere "conservatives"? Why not creatively reimagine an alternative 'meaning of history" ourselves?

Can conservatism be "creative?" And if so, how? Mikhail Remizov, president of the National Strategy Institute, answered, in effect, "how can it be anything else?" Critics on the left sometimes attack conservatism by saying, that conservatives do not preserve tradition, they invent it. Remizov dismisses the implied insult, because it demonstrates a misunderstanding of how traditions work: (re)invention " ... is the normal, creative approach to tradition." Remizov agrees with Hans-Georg Gadamer that sharply contrasting tradition and modernity is a silly and flat-footed way of looking at tradition, because the latter is always in any case a complex creative task of making adjustments and dialectical zig-zags. Such an understanding of culture and tradition as creativity fits, of course, quite nicely with the philosophy of Nicholas Berdyaev. It is hard to think of another thinker for whom creativity plays a more central role.

Alexei Kozyrev, associate dean of the philosophy department at Moscow State University, illustrated the same creative conservative principle when he spoke of the Russian Orthodox Church's Social Concept. The task of modern man, according to that document, is to find creative ways to retrieve the thought of the Church Fathers, for example that of Gregory of Nyssa, who counseled demonstrating our human dignity "not by domination of the natural world ... but by caring for and preserving it." The Social Concept likewise calls for defending the dignity of the unborn embryo and of the mentally ill. Here, in an unexpected twist, the Western environmental movement meets the pro-Life movement, challenging perhaps our own ideological boundaries.

Ambiguities

Although in this essay I am making no attempt at comprehensiveness, it would be misleading to completely ignore that different spirits dwell in the heart of Russian conservatism. Above I have emphasized the ones easiest to sympathize with. Among the least sympathetic trends is a recent one to willfully close one's eyes to Hannah Arendt's thesis that there is something in common between Nazi Germany and Stalin's version of communism. Recently, Zhirinovsky's nationalist LDPR party has even put forward a bill that would make illegal drawing such parallels. This is not good.

But even this subject turns out to be more complex than it at first appears. Schipkov, for example, readily concedes that Stalin was a "tyrant," but he also believes (and here he strongly overlaps with Arendt) that the imperialist project had from the beginning a quasi-totalitarian bent. Echoing Simone Weil, Schipkov finds in all forms of modernity some variation on the idea that 'strength and power' (including when 'power' takes the form of hard cash) should always rule. What is needed, for Schipkov, is a new modernity based on a Christian politics.

Matveichev, in his book Russia: What is to be Done?, occasionally makes excuses for Stalin as being, supposedly, the right man for his particular time and circumstance, though not for today. This is a rather mild assessment, it would seem. Matveichev's overriding concern in this book is to find some means of rescuing Russia from its current path of decline. Toward this end, he brainstorms a plethora of huge national projects: a nation-wide humanities 'Manhattan Project;' affordable housing and Green Revolution programs; even, at one point (resurrecting an idea of 19th-century Russian philosopher Nikolai Fedorov) a project for pursuing human immortality. But then Matveichev does an about face:

... [M]aybe I am mistaken ... Perhaps the time has come for small tasks, and we should take as our hero someone like Amelie in the film Amelie. Perhaps all of us together - but only together!!! - should renounce our big projects and get busy with the task that is the most difficult one of all: love of our neighbor.

Might as well be Pope Francis.

Dialogue with Russia?

Lesley Chamberlain claimed that Russia is not a puzzle. In fact that is precisely what it is. As should be clear even from the above very partial survey, Russian conservatism, like Russia itself, embraces a contradictory collection of flaws and virtues. Both the flaws and the virtues are large.

Among Russia's virtues, it must be emphasized, is a far greater freedom of speech than it is typically given credit for. Russian participants in the Kaliningrad conference demonstrated a boldness of imagination, a variety and depth of thought on alternate futures for their country that is by no means always evident in political speech even in the United States.

For Western liberals, it is tempting to present Russian conservatism as always intrinsically dangerous. But I believe the loss is ours. Russian conservatism-or at any rate important elements of it-contains something potentially valuable to the West as it seeks to forge a strategy for dealing with the growing disorder in the world. What justifies engagement with Russia is before all else its ability to contribute to solving the problem that all of us face: how to devise a softer version of western modernity, one which allows for the preservation of tradition while simultaneously retaining what is most valuable in the liberal tradition.

The author would like to thank Dr. Adrian Walker, Matthew Cooper and especially Dr. Matthew Dal Santo for their valuable suggestions and comments on an earlier draft.

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#23
New York Times
June 22, 2015
Editorial
The Fantasy Mr. Putin Is Selling

President Vladimir Putin of Russia is not veering from the mythology he created to explain away the crisis over Ukraine. It is one that wholly blames the West for provoking a new Cold War and insists that international sanctions have not grievously wounded his country's flagging economy.

He told the story again on Friday at a business forum whose purpose was to give weight to that fantasy. It drew at least 24 chief executives of Western companies, some of whom attended even though their governments had urged them not to.

Despite Mr. Putin's skill at using foreign executives as props, he is looking more desperate than confident that he will win the confrontation with the West.

It will be a big setback for Mr. Putin if, as expected, European Union foreign ministers formally extend sanctions on Russia by six months when they meet this week in Luxembourg. Ever since Russia's 2014 annexation of Crimea forced NATO and the European Union to react, he has worked to split the trans-Atlantic alliance, and some believe its collapse is his real goal.

The Europeans are indeed divided over the extent to which Russia, with its huge oil and gas resources, should be isolated, but Mr. Putin's aggression so far has ensured their unity when it counts. In addition to extending existing sanctions, the allies have prepared a new round of sanctions that could be imposed if Russian-backed separatists seized more territory in Ukraine.

In the meantime, Belgium and France last week began to seize Russian assets in their countries, to enforce a 2014 international arbitration court order for Moscow to pay shareholders of the Yukos oil company $50 billion in compensation after Russian officials forced it into bankruptcy.

Although Mr. Putin insisted on Friday that Russia had found the "inner strength" to weather sanctions and a drop in oil prices, investment has slowed, capital has fled the country and the economy has been sliding into recession. Even the business forum was not all that it seemed: The heads of many Western companies stayed away for a second year.

One of the most alarming aspects of the crisis has been Mr. Putin's willingness to brandish nuclear weapons. His announcement on Tuesday that about 40 new intercontinental ballistic missiles would be added to the Russian arsenal was not a surprise. The United States and Russia are both spending billions of dollars to modernize their weapons. But the move further alarms NATO allies near Russia's borders and the loose talk could undermine years of efforts intended to reduce nuclear tensions and the risk of war.

The United States and Europe have largely been measured in their response to the crisis. They need to stay measured and focused on diplomacy, always making it clear that the confrontation could end if Mr. Putin withdrew his troops and weapons from Ukraine and instructed Russian-backed separatists to observe the Minsk cease-fire agreement that both sides have routinely violated.

Given Mr. Putin's aggressive behavior, including pouring troops and weapons into Kaliningrad, a Russian city located between NATO members Lithuania and Poland, the allies have begun taking their own military steps. In recent months, NATO approved a rapid-reaction force in case an ally needs to be defended. It also pre-positioned some weapons in front-line countries, is rotating troops there and is conducting many more exercises. There are also plans to store battle tanks and other heavy weapons in several Baltic and Eastern European countries.

If he is not careful, Mr. Putin may end up facing exactly what he has railed against - a NATO more firmly parked on Russia's borders - not because the alliance wanted to go in that direction, but because Russian behavior left it little choice. That is neither in Russia's interest, nor the West's.

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 #24
New York Times
May 2, 1998
Foreign Affairs; Now a Word From X
By THOMAS L. FRIEDMAN

His voice is a bit frail now, but the mind, even at age 94, is as sharp as ever. So when I reached George Kennan by phone to get his reaction to the Senate's ratification of NATO expansion it was no surprise to find that the man who was the architect of America's successful containment of the Soviet Union and one of the great American statesmen of the 20th century was ready with an answer.

''I think it is the beginning of a new cold war,'' said Mr. Kennan from his Princeton home. ''I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the Founding Fathers of this country turn over in their graves. We have signed up to protect a whole series of countries, even though we have neither the resources nor the intention to do so in any serious way. [NATO expansion] was simply a light-hearted action by a Senate that has no real interest in foreign affairs.''

''What bothers me is how superficial and ill informed the whole Senate debate was,'' added Mr. Kennan, who was present at the creation of NATO and whose anonymous 1947 article in the journal Foreign Affairs, signed ''X,'' defined America's cold-war containment policy for 40 years. ''I was particularly bothered by the references to Russia as a country dying to attack Western Europe. Don't people understand? Our differences in the cold war were with the Soviet Communist regime. And now we are turning our backs on the very people who mounted the greatest bloodless revolution in history to remove that Soviet regime.

''And Russia's democracy is as far advanced, if not farther, as any of these countries we've just signed up to defend from Russia,'' said Mr. Kennan, who joined the State Department in 1926 and was U.S. Ambassador to Moscow in 1952. ''It shows so little understanding of Russian history and Soviet history. Of course there is going to be a bad reaction from Russia, and then [the NATO expanders] will say that we always told you that is how the Russians are -- but this is just wrong.''

One only wonders what future historians will say. If we are lucky they will say that NATO expansion to Poland, Hungary and the Czech Republic simply didn't matter, because the vacuum it was supposed to fill had already been filled, only the Clinton team couldn't see it. They will say that the forces of globalization integrating Europe, coupled with the new arms control agreements, proved to be so powerful that Russia, despite NATO expansion, moved ahead with democratization and Westernization, and was gradually drawn into a loosely unified Europe. If we are unlucky they will say, as Mr. Kennan predicts, that NATO expansion set up a situation in which NATO now has to either expand all the way to Russia's border, triggering a new cold war, or stop expanding after these three new countries and create a new dividing line through Europe.

But there is one thing future historians will surely remark upon, and that is the utter poverty of imagination that characterized U.S. foreign policy in the late 1990's. They will note that one of the seminal events of this century took place between 1989 and 1992 -- the collapse of the Soviet Empire, which had the capability, imperial intentions and ideology to truly threaten the entire free world. Thanks to Western resolve and the courage of Russian democrats, that Soviet Empire collapsed without a shot, spawning a democratic Russia, setting free the former Soviet republics and leading to unprecedented arms control agreements with the U.S.

And what was America's response? It was to expand the NATO cold-war alliance against Russia and bring it closer to Russia's borders.

Yes, tell your children, and your children's children, that you lived in the age of Bill Clinton and William Cohen, the age of Madeleine Albright and Sandy Berger, the age of Trent Lott and Joe Lieberman, and you too were present at the creation of the post-cold-war order, when these foreign policy Titans put their heads together and produced . . . a mouse.

We are in the age of midgets. The only good news is that we got here in one piece because there was another age -- one of great statesmen who had both imagination and courage.

As he said goodbye to me on the phone, Mr. Kennan added just one more thing: ''This has been my life, and it pains me to see it so screwed up in the end.''

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