Russia: Other Points of View

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

PARIS. The usual "solidarity" theatre. None of this means a thing and won't until we start to hear about the role of Wahhabism in all this, where it comes from and who spreads it; Daesh's Turkey supply route; that Washington and its allies cannot support jihadists in one place and expect to control them in another; that US neocons and "humanitarian interventionists" have produced a catastrophe; that Assad is an ally; that Iran is an ally; that Putin is not only an ally but knows what to do; that NATO is wasting its time "protecting" the Baltics from Russia and should either start really dealing with its members' security or give up. That will require an unprecedented amount of truth-telling. Danielle Ryan speculates on changes in the spin machine.

BUT MAYBE WE ARE HEARING... The CIA man who helped start it all reflects that Western intervention made it worse. A retired British general dares to say "Wahhabi". A former CIA deputy director thinks it's time to team up with Assad. Even the WaPo starts to get it – US-supplied missile destroys a US-supplied Humvee. Meanwhile, Russia's initiative gains support in Vienna.

PUTIN (ONCE AGAIN) EXPLAINS HIS POSITION. Take seven minutes and watch this video from about a year ago. And ask yourself: does this sound right or wrong? If you think it wrong, see Joe Biden agree with him: "[Our allies] poured hundreds of millions of dollars and tens, thousands of tons of weapons into anyone who would fight against Assad except that the people who were being supplied were Al Nusra and Al Qaeda and the extremist elements of jihadis coming from other parts of the world." (Text)

SYRIA. Obviously much is happening and the situation is very fluid. Russia stepped up operations against Daesh (the airliner was brought down by a bomb), targeting the oil business – videos of hits on storage tanks and trucks. Oil is a major source of Daesh funds; the US claims at last to be targeting it. (How could it not have seen those lines of trucks? But the US effort had been rather half-hearted.) Long-range aviation seems to be hitting infrastructure while (more) aircraft based in Syria concentrate on close air support to the Syrian Army (progressing). The big question is this: it is clear to the objective viewer that Russia is leading the attack; will Paris sign up with Moscow? Ideas that France "lead" the attacks are absurd: only Russia and the USA have "full service" militaries. Hollande is close to it: "In the next few days, I will therefore meet with President Obama and President Putin to unite our forces and to achieve a result which, at this point, has been put off for far too long." There's an opportunity because France is sending its carrier to the Med and Putin told the Navy to coordinate efforts with it. The two military heads have talked. Gilbert Doctorow, an astute observer, expects cooperation – there's huge popular support in France for it. Obama himself has taken a baby step towards the Putin position which was, again, upheld at Vienna. In short, Assad is not the problem, Daesh is. Even – even! – Clinton gets it.

REFUGEES. Syria's UN Ambassador says about a million refugees have returned since the Russian strikes, and associated Syrian army victories, began. A million? Well, anyway, it's clear that the solution to the European refugee/migrant problem is make the countries they came from worth living in again. More truth-telling will be required here: as I said before, the refugees come from places NATO "saved".

MESSING WITH THEIR MINDS. Russian TV "accidentally" showed a frightening Russian weapon. Or maybe it's just a piece of paper. The US will probably wind up spending billions and billions.

ECONOMY. More evidence that the Russian economy is turning around from Bloomberg.

ISOLATED PUTIN. The RI Humour Editor permits herself a small smile. Reality and polite diplomacy proves a powerful combination against fantasy and bluster.

SPORTS DOPING. Yes, no, maybe. But I am always suspicious when another anti-Russia campaign starts.

WHO'S IN CHARGE? 50 analysts from the US Defense Intelligence Agency have claimed their reports were manipulated to give "a more positive picture to the White House". The former DIA head says warnings were ignored. "Shellback" argues that the US int establishment does not support what the US Administration is doing. Are these catastrophes the work of amateurs and ignoramuses?

MH17. Remember that? Some Dutch media companies are suing the government to try and get more information. (In Dutch). By the way, US satellites detected the explosion of the Russian airliner, so what did they see with MH17 and why are we still not told what it was? You know why.

© Patrick Armstrong Analysis, Ottawa, Canada Websites: ROPV, US-Russia, Russia Insider

U.S., RUSSIA AND UKRAINE – “TIT FOR TAT” – DUELING “EXPERTS” AND DUELING NARRATIVES – THE DANGER ESCALATES

Dear Friends,

The article below was written by John E. Pepper, Jr., who for 40 years was in management at Procter & Gamble, and in year 2000 was made CEO and Chair of the Executive Committee of the Board at P&G.  He also has served as Vice President of Finance and Administration at Yale University and has been a director of The Walt Disney Company since 2006. He was responsible for P&G's successful move to Russia.

During the 2000s, John also Chaired the Board for the St. Petersburg State University's new Graduate School of Management which partnered with Berkeley University.  I sat on that Board, and CCI oversaw the funds contributed to and paid out for the renovation of two palaces for the new School of Management. John has a deep appreciation for Russia's history, culture and literature, and he has had long experience dealing with numerous Russians in high places over the years.  He, like many of us, has deep concerns about today's relationship between the two countries.

Sharon

 

June 24, 2015

U.S., RUSSIA AND UKRAINE – “TIT FOR TAT” – 

DUELING “EXPERTS” AND DUELING NARRATIVES – THE DANGER ESCALATES

As we all know, it is hard for an individual or nation to view the world or a particular situation through the eyes of another person or nation.

I have never seen this more true than what is transpiring now over the Ukrainian crisis as it is viewed by the United States and Russia.

This is a subject of deep concern because the security of our world is threatened and we risk losing the need for collaboration on such transcendent issues as nuclear proliferation and terrorism in Iran and Syria.

I could only look with irony at the statement of Defense Secretary Ash Carter as reported in the Wall Street Journal last week that the Pentagon is committing military gear to a NATO task force designed to deter Russian aggression because Moscow is, in Carter’s words, trying to “reestablish a Soviet-era sphere of influence.” 

How precisely that echoes Russia’s concerns—that the West, and particularly the United States, has, over the past 20 years, extended its “sphere of influence” by extending NATO well beyond what was expected in the early 1990s, even to the point of considering expansion to Ukraine and Georgia.  

There is a great danger in the affairs of humans and also of nations in self-fulfilling expectations.  These self-fulfilling expectations can be for the better and they can be for the worse.  The expectations held by Russia toward the United States and the United States toward Russia today are all “for the worse.”

We hear veiled and sometimes bald assertions that Russia intends to enter countries previously part of the Soviet empire--the Baltics, Poland and all of Ukraine.  Putin described such a nation as “insane.”   He is right.  Can you imagine the sheer idiocy of Russia undertaking to move into those countries?  Why would they do this?  There is no driving ideology as there might have been in the case of Soviet Communism.  Surely, Russia has no need for more land.  

Russia, quite understandably, looks for long-term economic and social ties with Ukraine.  But to try to take over a country where the majority of people would be repelled by being part of Russia makes no sense.  It would make Russia the pariah of the world and give them nothing in return but trouble. 

We are failing to seriously examine what is the true strategic intent of Russia.  I am not suggesting that they haven’t supported the Separatists in Eastern Ukraine; I feel quite sure they have, probably to help ensure that a constitutional settlement is finally reached that gives appropriate rights to the ethnic Russians living there. 

The interests of the United States and Russia should be very simple and the same.  We should support what has been so long coming--the creation of a unified Ukraine, with federalization much as it exists in other countries.  Pulling Ukraine together is a huge challenge.  The fissure between Eastern Ukraine and the rest of the country is large, ethnically based and now deepened by a civil war. 

Russia, the United States, all of us, should do everything we can to support this constitutional settlement.  We should not allow anything in our control to get in the way of that settlement, for nothing other than that will bring peace to the Ukrainian people.  And that’s what they want.  That’s what the people in every country want.

I fear that most people are so far removed from the horror of war today that we have forgotten what it’s like.  It might serve everyone to go back and look at the movie “Platoon” or “Saving Private Ryan” again to be reminded what the cost of war is to human life.  

I believe we are at a historical precipice.  I am extremely worried by the unfettered “propaganda,” and that’s what it is, on both sides of the issue.  This has had the insidious effect of bringing the people of Russia and of the United States to view the “other” as “evil.”  And in fact they are not.  They are committed to their own national interests. 

Russia Moves Towards Self-Sufficiency

Friends,  

Not until the sanctions against Russia started was there any push to give serious attention to Russia's agricultural sector.  This was a year ago, hardly enough time to make significant difference in a sector that has not had much attention for decades. Once Russia opened up their borders in 1990, they assumed they could purchase their food abroad rather than trying to revamp the USSR's agricultural system. 

A very impressive teenager some of you met in Moscow in 1983,  Andrei Danilenko, is now the Chairman of Russia's Union of Milk Producers. His opinions are noted under "Sector Shakeup" below.

Will be interesting to see what will happen if Putin, et al, decide to seriously get behind the industry.   S. 

 

Published on Russia Insider News (http://russia-insider.com)

Russia Moves Towards Self-Sufficiency

This article originally appeared at The Moscow Times

President Vladimir Putin appointed a regional governor from southern Russia to head the Agriculture Ministry on Wednesday in an apparent bid to galvanize domestic production, which has failed to take advantage of reduced competition ushered in by a 2014 Kremlin food import ban.

Alexander Tkachyov, the governor of the grain producing region of Krasnodar, will replace lawyer Nikolai Fyodorov, who has been in the post since 2012 and will become a presidential adviser.

“We need our own produce, the produce of domestic manufacturers, to fill our own market and this needs to be done quickly,” said Putin, according to a transcript on the Kremlin’s website.

Moscow banned food imports from the European Union and United States in August in retaliation for a series of Western sanctions imposed on Russia for its role in the Ukraine crisis. Russian officials trumpeted the embargo as a godsend for domestic manufacturers, but overall production has barely grown.

Putin must decide whether to extend the food ban in three months.

Russia on the RISE? NEWSWEEK PREDICTS …..

Friends, the ruble is somewhat recovering, seemingly Russia is also slowly but surely coming back ….  could the agonizing Ukraine debacle, the reuniting with Crimea, the bloody tensions of the past year and the sanctions,  have had a reverse effect than anticipated?

Might they all have been grist for the mill that ground down …. and in an unexpected upturn is becoming the early dawn of a multipolar world?

Check what NEWSWEEK has to say.   S.

And keep your eye on Russia Insider -- which seems to be first with the latest analyses these days. 

Published on Russia Insider News (http://russia-insider.com)

Is Russia's "Bullet Proof" Economy Ready to Blast Off?

Phil Butler 

Watching the tide of foreign policy, influence, and business turn concerning Russia, it’s a rewarding experience for all the moderates of the world. Bill Powell at Newsweek assures the journalistic faithful of Earth there’s even hope for mainstream media today. Despite US and EU sanctions aimed at crippling the Russian economy, Vladimir Putin’s economic endeavors of late have apparently saved the Russian nation’s day.

The Newsweek article, “What Sanctions? The Russian Economy Is Growing Again,” is symbolic of a break in the negative trend toward Russia in many ways. Powell takes something of a leap of faith and credibility in outlining how recent detente has "not exactly what the West was hoping for." Against what seemed like insurmountable economic odds, Putin’s ruble has rebounded, the stock market has out performed most competing ones, foreign exchange reserves are up, and the Russian government’s revenue has even exceeded expectations.

Russia May Be Bulletproof Economically

While crude oil and energy prices have hit Russia companies hard, they’ve empowered Russia industry to some of the highest profits in recent history. This and other “unexpected” stimulus as a secondary result of sanctions, spell a kind of policy disaster in Washington, London, and Brussels.The meat of this story from Newsweek can be found in the MICEX index, as well as on the micro level with companies like steelmaker Severstal (New Renault-Nissan deal) . For those unfamiliar with heavy industry, steel for auto makers and other markets depend, price wise, on the costs of energy used to produce. When I was at Nucor Steel in America, other than the costs of scrap and other raw materials, the electricity to power steelmaking was enormous, critical, a make-or-break commodity. The long and short, in competitive manufacturing price opens or closes markets. The dive in energy costs, combined with other cost/revenue benefits Powell describes, have helped Putin’s finance ministers’ make a fiscal shift toward growth.

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

AGREEMENT. Ceasefire. Pull-back of heavy weapons. Autonomy talks. OSCE. Does Poroshenko mean it? Can he deliver? Will Washington let him? What happens if there's a “nazi spring” in Kiev? Or in Galicia? The Donbass wants out. Will the WMSM stop its propaganda? (If Putin is so determined to conquer Ukraine why has he twice signed an agreement by which the Donbass stays there?). There's no provision for vigorous enforcement. The Debaltsevo pocket isn't cleared. It's too much like the last agreement when Kiev forces never pulled back and never stopped shelling. At best, a first small step; at worst, a pause so Kiev can try again (here's Poroshenko explaining they used the last pause to re-arm).

DÉJÀ VU ALL OVER AGAIN. Obama says the US “brokered a deal on Ukraine”. Interesting slip: Washington wasn't part of the 21 February 2014 agreement. Perhaps he's referring to two American officials deciding the new Ukrainian government without reference (well one) to the EU. The ineffable Jen Psaki explains that's not what he meant. Perhaps he meant to say “broke the deal”.

IF YOU WANT ENEMIES, WE CAN DO THAT TOO. Revealing photo: why are Putin and Lukashenko smiling and the other three not? Have Hollande and Merkel just had a reality check? Could it be something like this: NATO says it's taking “necessary measures to respond to the challenges posed by Russia and their strategic implications” and lumps Russia in with “risks and threats” in the southern neighbourhood; “Russia’s aggression against Ukraine is not an isolated incident, but a game-changer in European security”. Should Russia treat these statements from the world's most powerful military alliance as empty prattle? Or should it ask itself why it's selling energy to countries that call it an enemy?

MORE REALITY. The Debaltsevo pocket traps several thousand Kiev troops. (Maps and videos). More talk of “betrayal” and the like. It is said that a million Ukrainians of military age have fled to Russia joining another million or so. Here's a video from eastern Ukraine illustrating the reaction to the latest conscription. Deserters can now be shot. German intelligence says the death toll is more like 50,000. Neo-nazis carefully ignored by WMSM. And the solution is more weapons? Kiev started with most of the weapons and has been regularly defeated. The rebels now even have an aircraft they captured. If you prefer, here's a Kiev side account: victory all the way!

LITVINENKO DEATH. At last the words “Ichkeria” and “nuclear weapons” have surfaced in the London enquiry. Always been my favourite theory and Gordon Hahn's too.

ECONOMY. We have official numbers for 2014. GDP was up 0.6%, the January-November trade balance was US$176 billion, up 0.6%; industrial production up 1.7%. On the bad side, the consumer price index rose 7.8% while real disposable income fell 1%. Capital flight (so-called) was US$151.5 billion but 85% of that was actually debt repayment (see below). The RUB/USD exchange worsened from 33 to 56. Oil prices are creeping up gradually. Hardly Obama's “economy in tatters”.

RUSSIA'S EXTERNAL DEBT. It's being paid off quickly – here's a report.

REPORTERS COMMIT REPORTING! “Dramatic video has emerged of the moment a soup kitchen was hit by Ukrainian military rockets.” This is first time I've seen a Western media outlet telling the truth that Kiev forces are routinely shelling civilians; always before where the shots come from has been a Great Mystery. “Untold story of the Maidan massacre”! What's next: suddenly unsuppressed MH17 reports?

SANCTIONS. The Spanish Foreign Minister estimates that Russia's food sanctions have cost the EU €21 billion. Meanwhile Turkey's food exports have gone way up. Ditto Argentina's. Whatever happens, I think the Europeans have lost most of that market.

TURK STREAM. First stages underway. How's the EU doing on building its connection?

ISOLATED RUSSIA. China again supports Russia. China, Russia and India vow to “build a more just, fair and stable international political and economic order”. An excellent trip to Egypt and, maybe, new relations with Greece. Not “isolated” either.

DELUSION. Saakashvili thinks a properly armed and prepared Ukrainian army has the “spirit” to capture all of Russia. Soros and BHL tell us Ukraine is a “participatory democracy; a noble adventure”. McCain thinks that arming the side that began with all the weapons and lost anyway is a good idea; Graham says it will make him “feel better”. Poroshenko thinks Russian soldiers would carry passports with them.

© Patrick Armstrong Analysis, Ottawa, Canada Websites: ROPV, US-Russia, Russia Insider

Russian Politics: A Different Kind of War

Friends,

 

Chris Weafer, an esteemed, long-term financial analyst in Moscow gives his summary of Russia's economic situation at this stage of the standoff between the U.S., its European allies and Russia.  Chris has remained totally neutral in his analysis over the years, is not involved with the Kremlin and  has been a boon to American and European investors over the years.

 

Chris Weafer

Senior Partner

Macro-Advisory Ltd

Moscow

 

December 4, 2014

 

We have today issued a special report looking at the political aspects – both geo-political and domestic – of the crisis. We address such questions such as “what are the political drivers of the crisis?”, “will Russia back down or continue to live with sanctions indefinitely?”  “Does the crisis risk altering the domestic political balance?”, “what are President Putin’s key geo-political and domestic priorities?”, “how does Russian legislation work?”

Today starts a sequence of important events – five important Thursdays in a row – which will serve to clarify the Kremlin's list of priorities and also what we may expect in terms of investment reforms and risks in 2015. Today President Putin delivered his annual address to the Federal Assembly (State of the Nation address).Nothing new or exceptional (see December macro Monthly to be issued in the coming days). Next Thursday (11 December) the Central Bank holds its last policy meeting of the year and is expected to clarify its ruble policy – if not forced to do so before then. On Thursday 18 December Putin holds his annual televised press conference and will answer questions from the audience and the public. Here also we usually get greater clarity on priorities and policy. That is the same day as the next EU Leaders Summit in Brussels, at which we should hear more comments about sanctions, etc. The followingThursday is 25 December and the fifth Thursday is New Year's Day. Rumors of Cabinet changes are already emerging in Moscow as the period between the Western Christmas and New Year is when such events tend to happen most often.

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

SPEECH. Putin is making his annual speech to parliament today. Again I encourage you all to read what he actually says rather than selections twisted to fit propaganda requirements in the MSM. English. “The agreement between Ukraine and the European Union has been signed and ratified, but the implementation of the provisions regarding trade and economy has been postponed until the end of next year. Doesn’t this mean that we were the ones who were actually right?” Well, doesn’t it?

SOUTH STREAM. South Stream was a proposed gas line from Russia, under the Black Sea, to come ashore in Bulgaria and serve southern Europe. The southern equivalent of Nord Stream, it would avoid the uncertainty of Ukrainian transit routes. The EU took against it and Bulgaria was pressured to delay or cancel. Brussels thought that Moscow could be bullied. It was wrong: Putin announced the cancellation in Ankara. “If Europe does not want to implement it, then it will not be implemented. We will focus our energy resource flows on other regions of the world”. Western governments and media are trying to spin this as a defeat for Russia. “These reports are evidence of pressure mounting on Russia... and reduce Russia’s ability to use gas as a tool of coercion”. This is nonsense of course. Southern Europe will remain dependent on uncertain shipments of Russian gas passing through Ukraine or on as-yet-unbuilt tankers and port facilities bringing in more expensive and possibly non-existent LNG from the USA. It won’t see employment in building the line or transit fees. Some reactions from Bulgarians. The Eurocrats and NATOcrats in Brussels get their Russian gas via Nord Stream. So they will be warm this winter.

UKRAINE: ITS ONLY THE END OF THE FIRST PERIOD

FINANCIAL ANALYSIS

by Chris Weafer

A good hockey player plays where the puck is. A great hockey player plays where the puck will be” 

Wayne Gretzky

Petro Poroshenko’s first priority will be to suppress the para-military groups in East Ukraine. His second priority is to establish economic pragmatism with Moscow. The Kremlin is open to such an approach but has stipulated that it is closely monitoring the actions against the pro-Russia separatists in the East. This may yet be a deal breaker which would keep investment risk high in both countries. The worse the TV pictures from the East and the longer they last, the greater the pressure on markets in both countries. 

There are conflicting messages about a possible EU brokered gas deal. It is still very possible that a deal will be struck by the weekend (very positive for all sides and for Gazprom’s cash flows) but threats are still being exchanged against a tense political backdrop. As we have noted previously, a gas deal (or not) will provide the clearest signal of the hoped for pragmatic relationship between Russia and Ukraine and the start of an improvement in Moscow’s relations with the EU. 

We expect Ukraine to pay down $2 bln of the debt up-front and another $500 mln in June and Gazprom to revise its price to the European average (or close to it) which is currently $380 p/1’000 cm. Naftogaz is reported to be still unhappy with the terms (probably on the volume off-take) but the EU is pushing Kiev to reach a deal. That may be ahead of this weekend’s deadline or in the coming weeks. Kiev has received $3.2 bln from the IMF, plus has raised $1 bln via the US loan guarantee and is expecting at least $1 bln from the EU shortly. It has enough to cover Gazprom plus other scheduled debt obligations.

The full note is available  Download Ukraine_Its_only_the_end_of_the_first_period_28.05.14

UKRAINE-RUSSIA: HEADLINES GET WORSE.... BUT GAS IS THE KEY INDICATOR

FINANCIAL ANALYSIS

by Chris Weafer

“Let me warn you, if you start chasing after views, you’ll be left without bread and without views”

Nikolai Gogol

Weekend headlines will add to market nervousness today. The headlines from east Ukraine over the weekend will unsettle markets at the start of trading today. The situation is clearly very dangerous and largely unpredictable. But, despite the ratcheting-up of rhetoric from all sides, the evidence still suggests that Russia will not invade. Instead Russia has always supported the protestors’ demands for some form of federalism in the east.

Sanctions risk if the West blames Moscow. The key risk is whether the US/EU believes Moscow is behind the escalation of violence in the east and, even without a military incursion, moves to the more serious economy and trade disrupting sanctions. This question will be the focus of investor attention over the coming days.

Diplomatic efforts were starting to pick-up. As the crisis escalates on the ground, the foreign ministers from Russia, Ukraine and the US/EU are due to meet for the first time in Geneva on Thursday to discuss the crisis. That is the same day President Putin is scheduled to hold his annual televised Q&A session and Ukraine and the economy are expected to dominate. If that planed meeting is cancelled this would be taken as a very negative signal by investors and we would see a further step down in equities, the ruble, and in debt markets.

How the gas dispute proceeds will provide a good indicator. Based on that critical assumption, i.e. no military action and no increase in sanctions against Russia that such a move would certainly provoke, investors need to follow the gas dispute closely. What happens here will provide the best indicator of whether political pragmatism is emerging as the backdrop to the headline crisis or whether the dispute either remains deadlocked or could be deteriorating. In the case of the former, long-only investors should start buying into selected equities and sovereign debt while, in the case of the latter, they should continue to stand-off. 

to access the full report, click  Download Russia-Ukraine_Brief_Risk_&_Gas_Indicator_041414

CONFIDENCE IN DEMOCRACY AND CAPITALISM WANES IN FORMER SOVIET UNION

Disclaimer: although released first in 2011, the trend set described in this report, continued to gain prominence among Russia's population.

Pew Research Global Attitudes Project

Confidence in Democracy and Capitalism Wanes in Former Soviet Union

Twenty Years Later

Two decades after the Soviet Union’s collapse, Russians, Ukrainians, and Lithuanians are unhappy with the direction of their countries and disillusioned with the state of their politics. Enthusiasm for democracy and capitalism has waned considerably over the past 20 years, and most believe the changes that have taken place since 1991 have had a negative impact on public morality, law and order, and standards of living.

There is a widespread perception that political and business elites have enjoyed the spoils of the last two decades, while average citizens have been left behind. Still, people in these three former Soviet republics have not turned their backs on democratic values; indeed, they embrace key features of democracy, such as a fair judiciary and free media. However, they do not believe their countries have fully developed these institutions.

In contrast to today’s grim mood, optimism was relatively high in the spring of 1991, when the Times Mirror Center surveyed Russia, Ukraine and Lithuania. At that time all three were still part of the decaying USSR (which formally dissolved on December 25, 1991). Then, solid majorities in all three republics approved of moving to a multiparty democracy. Now, just 35% of Ukrainians and only about half in Russia and Lithuania approve of the switch to a multiparty system.

As was the case two decades ago, the shift towards democracy tends to be more popular among those who are perhaps best positioned to take advantage of the opportunities provided by an open society. In all three countries, young people, the well-educated and urban dwellers express the most support for their country’s move to a multiparty system.

Continue reading