29 December 2014

Kremlin quietly supports network that sends thousands of Russian veterans to Donbas war

Atlantic Council: 29. December 2014
BY JAMES RUPERT


In a photo from Vladimir Yefimov, Yekaterinburg Online shows Russian army veterans who have joined the war in Ukraine's Donbas region. (Yekaterinburg Online screenshot/www.e1.ru)

How a retired Russian Army officer sends ‘volunteers’ to fight in Ukraine


In Yekaterinburg, the main city of Russia’s Ural region, retired army officer Vladimir Yefimov organizes army veterans to fight for Russia in southeastern Ukraine, more than 1,000 miles away. While Russia’s deployment of army troops and non-official Russian “volunteer” fighters in Ukraine is not news, Yefimov describes in new detail how Russian army vets are selected, organized and paid to join the war. His account underscores that the army of Russian "volunteers" is run with at least the tacit help of the Kremlin.

Yefimov is a former Special Forces (spetsnaz) officer who now heads the Sverdlovsk Oblast Fund for Special Forces Veterans. In an interview with Yekaterinburg Online, a local news website, he told of sending between 150 and 250 fighters to Ukraine’s Donbas war zone this year. While he says his fighters are “volunteers” rather than mercenaries, they are paid salaries: from $1,000 per month for a low-ranking enlisted man to $2,000-4,000 for officers. Yefimov did not answer the reporter’s question about who pays the salaries.

Ukraine's government says more than 10,000 Russian mercenaries form the bulk of the Russian proxy forces that the Kremlin has used to sponsor the creation of the separatist "people's republics" in parts of Ukraine's Donetsk and Lugansk provinces. Many fighters are motivated by the propaganda of the Kremlin-controlled media, Yefimov says. “Our press and television present the dramatic facts. The Russian people cannot tolerate the terror that the fascists have staged there [in Ukraine]. Killing women, children and the elderly. Most of those who go [to fight] are sensitive and empathetic; they want to help. This is especially true for people from 40 to 60 years of age, who were brought up under Soviet traditions.” Other fighters go because they miss the adrenaline of war or to earn money, he said.

Russia uses the Red Cross

Russian fighters were first sent into Ukraine as “escorts” for Red Cross aid trucks, Yefimov says, and they now are sent via “humanitarian aid” convoys supervised by the paramilitary Ministry of Emergency Situations. In an interview published the day after Yefimov’s, the director in Moscow of the Red Cross, Igor Trunov, says the dispatch of Russian "humanitarian convoys" to Ukraine is a violation of international humanitarian law, and says the "Putin convoys" are likely to have carried weapons to the [separatist] militia-controlled area of Donbas. “I do not want to throw stones in the garden of our institutions, of our state. ... But there is international law. What is the Ministry of Emergency Situations? It’s a paramilitary organ of the Russian state. And as a paramilitary structure it entered the territory of another state? ... This is an invasion. This is a violation; it cannot be done.”

With Yefimov’s interview, “a Russian has confirmed what Russia has done,” writes Eurasia scholar Paul Goble, noting “the level of detail he provides, the photographs of those involved, and the reproductions of the forms he and his comrades use” in running their operation.

Yefimov’s points include these:

The Kremlin is quietly supportive, but is keeping all deployment of fighters unofficial.
Yefimov wrote to the office of President Vladimir Putin to ask for official status that would let recruiters open bank accounts. Putin’s regional representative wrote in reply that "At the moment, consideration of the initiative is not possible. Thank you for your patriotic impulse!"
Russian veterans’ associations form a broad recruitment network. 
“I’m not the only one sending,” Yefimov says. “Others doing it are the Afghan veterans’ groups, the Chechnya veterans. We don’t discuss with each other the numbers, but we keep in touch by phone about those who have been rejected—for example for criminal records, for objective reasons, so that they don’t go to war through others. Still, to fully control the flow of departing volunteers, of course, is impossible: the border is open.
The casualties among Russian volunteers are uncounted.
“I think no one has it,” Yefimov says, referring to a tally of deaths among “volunteer” fighters. “There is no central coordination in the sending of people, there is no general assembly point, so there are neither statistics nor an understanding of the scale.”

The translated interview follows.

Head of the Sverdlovsk Fund of Spetsnaz veterans: “I help volunteers go to fight in Ukraine”
By Ilya Kazakov

Sverdlovsk residents are traveling to Ukraine to fight and are dying in the war; this is already a fact. In August, we recall, Alex Zasov, a contract soldier from Novouralsk, was killed in southeastern Ukraine; the Russian president recently decorated him posthumously with the Order of Courage.

On October 15, Two Urals residents—Vasily Zhukov from the Sverdlovsk village of Belokammeniy, and a 37-year-old native of the village of Novoutkinsk, Gennady Korolev—were killed after being hit by an explosive shell from a Ukrainian tank. Another man in that battle, wedding photographer Mikhail Laptev from Kamyshlov, lost a leg.

On October 30, Donetsk airport police shot and killed former Yekaterinburg policeman Paul Bulanova, and for almost a month and a half, his relatives were unable to bring his body back from Ukrainian territory.

On December 14 in Yekaterinburg, Urals-region volunteers were solemnly decorated, having distinguished themselves in combat in Ukraine and returned home safe and sound.

We found the man who organized this award. He works, as he states himself (and by the accounts of several relatives of the boys who have died over there), to send Sverdlovsk’s men to the civil war. 
Who is he? Why does he do this? And is it true that volunteers get the war a lot of money? The answers come in an exclusive interview with the head of the Sverdlovsk Fund of Special Forces Veterans, Vladimir Yefimov.

Q. Why do you head up the special forces veterans’ fund? What issues do you work on? 
A. In 1993, I commanded a combined detachment of the Sverdlovsk region in the storming of the White House in Moscow. At the direction of Boris Yeltsin, I participated in the suppression of the "red-brown" coup. In 1994, the cossacks elected me ataman [head] of the Isetsky Line Cossack Army [a prominent Cossack paramilitary organization based in the Urals region]. In 1998, I became the head of the oblast Fund of Special Forces Veterans. Since 2000, I’ve been retired.
About 1,500 people from throughout the Urals participate in the work of the fund. We engage in military-patriotic education, the socio-economic rehabilitation of war veterans. But now, given the situation in the country, we have no time for social activities. We help with sending volunteers to Ukraine.

Q. When did you begin to help in sending the Urals men to the war?
A. After the Maidan, but before the reunification of Crimea [to Russia]. I called up the veterans themselves, and said, “Dmitrich what's going on?! Let’s go, it’s necessary to restore order!" I took time to weigh everything. And they could not resist and they rushed off at their own risk. There is a good old saying: If it’s impossible to prevent a chaotic situation, then it’s better to lead it. After that, I began to prepare the first group to go to Crimea. The first to go were the guys from Khanty-Mansiysk: special forces veterans. Cossacks. They themselves worked in shifts to prepared the GAZ-66 [military truck], and three jeeps equipped to the nines. They paid for it all out of their own pockets. They took me and we drove off. In Crimea, I have many relatives and friends.
When we reached Kerch, I organized everything—gave the fellows responsible guys who connected them to the base, and in the end they were "polite people." (This is a label used for the armed men in uniforms similar to the Russian and unmarked; they participated in Crimea until its formal re-unification to Russia – author’s note). When Crimea became Russia, they returned. They received great satisfaction. Some went for the adrenaline, some went just not to be bored. From that moment I seriously took up sending volunteers to Ukraine, including to Lugansk and Donetsk.

Q. How are the volunteers selected? 
A. People come to us at the fund, they write to me a declaration: "Please provide me with support in sending me to provide help to the struggling people of Novorossiya.” Together with this declaration, the man fills out a questionnaire with his data: who he is, where, where he is from, where he served [in the military], what combat experience he has. If he is a member of the Fund, such a profile already exists in our database. After we read his application we conduct an interview. If a person is suitable as a combatant, I include him in the group to send. To all such people we give a "volunteer’s pass." That is, specifically, “volunteer,” not “militiaman.” This is an official paper with the stamp of the Fund, so that no one later ties us to mercenarism.

Q. Who goes to Ukraine?
A. All kinds of people. Guys from 35 to 55 years are the most seasoned age group. There are younger guys, too. Since June I’ve sent six groups, each of 15 to 30 people, to Donetsk and two groups of 30 people to Lugansk. There are also the well-off guys who can equip themselves. They were completely useless. Some of them hadn’t even served in the army.
There were even some who said, "Take me - I'm a drug addict. Maybe there I can get off the needle under the stress of that situation.” 
I’m not the only one sending. Others doing it are the Afghan veterans’ groups, the Chechnya veterans. We don’t discuss with each other the numbers, but we keep in touch by phone about those who have been rejected—for example for criminal records, for objective reasons—so that they don’t go to war through others. Still, to fully control the flow of departing volunteers, of course, is impossible: the border is open.

Q. It’s said that guards of private security firms are sent there in an organized way. Is that so?
A. First time I hear about it. But I don’t rule out that they can go there. They’re not connected with the state; their status as volunteers is assured. But, of course, they have few skills. Not everyone can be qualified. Over there they need guys with combat experience

Q. And active-duty military, Emergency Situations (Ministry) personnel, or police—during their holidays, can they go?
A. Russian legislation does not prohibit this. If there is a specific, direct prohibition [from the agency or unit commander], then they can’t. If not, they can go. The need for professionals there is great. But you understand that within the government, everything has been thought through. If someone gets caught over there, he will have long before that already have been dismissed, and it’s possible even that the documents for that eventuality will have been prepared in advance. That’s what I think (laughs).

Q. Do you somehow divide up the professionals and useless? Or they are on the same team?
A. I immediately separate the flies from the cutlets: Special Forces and elite go to Donetsk. Cossacks and newcomers without combat experience—to Lugansk.

Q. How much does it cost to provide one volunteer?
A. On average, a soldier with equipment and salary, which I estimate will hold in the future, goes for around 350 thousand [rubles; at recent exchange rates, equivalent to $5500 to $6500] per month. This is the cost of special forces work. One armored vest costs 70,000 rubles; night-vision binoculars are $1,500. And there is more winter clothing, footwear, food, medicines. This is really the economy price.

Q. Of that amount, how much would be salary? 
A. Now there are even informal wage standards. I am told that Pyatigorsk Cossacks get paid somewhere around 60,000 to 90,000 rubles a month for enlisted personnel; and 120-150 thousand for officers. Now, they say, salaries have grown as high as 240,000.

Q. And why a salary? After all, they are all volunteers, as you say.
A. I think that people have to be paid. After all, they are risking their lives. With the help of a salary, the professionals can be attracted to the war. They come, and their eyes sparkle. They accomplish their mission and they don’t feel mistreated. (He pats his pocket).

Q. Who pays all of this?
A. We get help, for everything except for the salaries, from volunteers and activists. They find and organize KamAZes [cargo trucks] with humanitarian aid. They find people willing to help with equipping the fighters. We don’t have a formal [bank] account for assisting the volunteers. So often, this is the mechanism we use: We bring our sponsors with the bills for what we need, After it’s paid, we get a chit for the goods with which we pick them up. It also can happen that someone will have 100,000 rubles and will call me and say, “Let’s go buy them something.” Then we’ll take him with eight volunteers and each one can choose what he needs.

Q. Do you also buy weapons?
A. No, we don’t buy weapons. How would we buy them here? All of that is handled on the receiving side. You arrive, you sign, you receive. You’re coming back, you hand it over. They’re very strict with this.

Q. Our government is sponsoring you?
A. So far, it doesn’t help at all. In June I wrote a letter to the [Russian] presidential representative for the Urals Federal District, Igor Kholmanski. There I clearly explained that it is necessary to create a [government-registered] social organization to support the volunteer movement in Donbas. Officially. That would let us open a bank account, to which businesses could transfer money. We could then establish official relationships with our volunteers—negotiated contracts. Not to fight, but to provide humanitarian assistance (laughs). The law is like a post—you cannot step over it, but you can step around it. Officially, the organization would select candidates for humanitarian service. We need our own training center, where it would be possible to train people and, in the course of training, assign each person a military specialty.

Q. And what did the presidential representation say to you?
A. "At the moment, consideration of the initiative is not possible. Thank you for your patriotic impulse."

Q. And how do the volunteers get to their duty station?
A. The first time they went under the guise of the Red Cross. They would get from the local branch a document that they were escorts [for a convoy]. When they arrived, they just stayed there. They were given weapons and put into combat missions. Now we also load the boys into the trucks with the humanitarian aid and send them. On average, they go for a month. Some dot it while on vacation, some probably just to earn money. I ask them not to tell me how much they receive. It doesn’t concern me. 

Q. After that, you are no longer responsible for their fate?
A. We don’t have the money to bring the body back to Russia or to help the relatives. I immediately warn all those who are leaving about this. They have no illusions. But where we can, we do provide help.

Q. And how many Russian volunteers were killed in the Donets Basin, including the Urals? Do you have this data?
A. I don’t have it. And I think no one has it. There is no central coordination in the sending of people, there is no general assembly point, so there are neither statistics nor an understanding of the scale.

Q. Don’t you consider it necessary to investigate the killing of each volunteer? To clarify the reason for his death? 
A. It’s essential to understand. The commander of a normal unit keeps a log of operations in which he puts the intelligence information, each battle, all the plans, and the particulars of all irretrievable losses. But it must be understood that under the conditions of war, it’s not always possible to establish the exact cause of death.

Q. Can the relatives of those killed get access to this information? Can they learn how and where their relatives were killed?
A. We tell them what happened.

Q. So why do all these volunteers still go there?
A. Our press and television present the dramatic facts. The Russian people cannot tolerate the terror that the fascists have staged there [in Ukraine]. Killing women, children and the elderly. Most of those who go are sensitive and empathetic; they want to help. This is especially true for people from 40 to 60 years of age, who were brought up under Soviet traditions. My blood boils when I see an artillery explosion upon a woman with a child. What are those swine doing?I
Such sentiments were aroused especially by the events in Odessa, where a lot of guys were burned alive. Some people also go for the adrenaline. Especially those already have fought previously and who feel pulled back to it.

Q. You are helping people to go to war. Do you not feel sorry for them?
A. Do you think it doesn’t make me sad? I’m sorry, of course. Don’t imagine that my goal is to send as many as possible there. No, my goal is to send as few as possible. And for those I send, that they’re the ones best prepared for combat, and those who can’t be stopped in any case. Those will go, if not through me, then through others, or even on their own.
I see a Special Forces guy with experience. Yes, he drinks, but he has no family, no children. He wants to fight.
For the inexperienced, I try to dissuade them. I say, you’re not a professional; you’ll be the first in combat to fall. Not long ago, a very young boy came to me. He hadn’t served [in the military]. He declared he wanted to go make war in a United Ukraine. With a trident on his arm. I really let him have it. … 

Q. Now in Ukraine the situation is relatively calmer. Are new groups of volunteers preparing to go?
A. Most recently, Russian volunteers have been squeezed out of Novorossiya under various pretexts. Commanders are calling guys who are already there and saying, "Go home, you're not needed here." So for now, I’m not preparing new groups. They’re just not needed. But there are reserves.

Q. Are you afraid of what will happen, as in Kazakhstan, where volunteers who fought in Donbas are on trial? That suddenly you might be charged? For example, for mercenarism?
A. For myself and for those volunteers who went to fight on my voucher, I am calm. If someone finds that we are working to fulfill some order [from anyone], let them put us on trial. But you cannot prove something that’s not there. People are going there voluntarily.

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James Rupert is an editor with the Atlantic Council.

Ukraine volunteers bring support to soldiers

Mashable: 29. December 2014
BY ELIZABETH PIERSON


An activist of the public volunteers group "Help to Army" wearing a costume of Father Frost kisses a serviceman of the Ukrainian Army after giving him a New Year gift near the eastern Ukrainian city of Schastya, Lugansk region on December 27, 2014.


In the wake of the ongoing crisis in Ukraine, volunteers across the country have united to support Ukrainian soldiers.
The movement is expansive and wide-ranging, with volunteers providing everything from food and warm clothes to bulletproof vests and camouflage tents. In addition to donations, they also care for injured soldiers, offer patriotic lessons at school and send family photos to the trenches.

Volunteers often work through the nights after finishing their day jobs, and many are supported by their families' salaries because they donate their own salary to the cause. Some people give up their weekends and vacation days to help their heroes on the front lines in eastern Ukraine.

Additional reporting by the European Pressphoto Agency.


A volunteer packs products in boxes in a Kiev supermarket. Items were collected during the day, and distributed to Ukrainian soldiers who fight in the country's east. Volunteers donate money, food, warm clothes, medicine, medical supplies and other items that soldiers may lack in the cold trenches.
IMAGE: TATYANA ZENKOVICH/EPA


A volunteer covered with the Ukrainian flag holds a charity box, and collects money for soldiers. The sign on the box reads "Help to ATO soldiers."
IMAGE: TATYANA ZENKOVICH/EPA


Ukrainian volunteers talk in front of their base where they make camouflage nets for soldiers. Volunteers operate like small organizations, and share their resources with each other, depending on what one particular battalion needs and asks for.
IMAGE: TATYANA ZENKOVICH/EPA


A volunteer affixes an orange heart to a newly made camouflage net to cheer up soldiers.
IMAGE: TATYANA ZENKOVICH/EPA


Workers load a wood stove made from a used gas cylinder into a van; it will be sent to Ukrainian soldiers in Rakitnoe. The smith produces wood stoves, metal staples, iron knives and other metal production for Ukrainian soldiers for free.
IMAGE: TATYANA ZENKOVICH/EPA


Wooden stoves are produced from used gas cylinders, which local people donate to the smith.
IMAGE: TATYANA ZENKOVICH/EPA


A Ukrainian volunteer with the organization Peacemakers of Ukraine finishes making a bullet-proof vest with a metal plate in a garage, which serves as a storehouse for humanitarian aid in Kiev.
IMAGE: TATYANA ZENKOVICH/EPA


Volunteers load groceries from a cart into a car outside of a supermarket. Volunteers help injured soldiers, offer patriotic lessons at schools, and send personal parcels, letters and children's pictures to the front lines. Some even hand over their private cars to the army, and volunteer to collect and deliver aid supplies to soldiers.
IMAGE: TATYANA ZENKOVICH/EPA


A Ukrainian volunteer from a local car service welds a structure for carrying weapons on the top of a car that was bought by volunteers, and is being re-equipped for soldiers.
IMAGE: TATYANA ZENKOVICH/EPA


A Ukrainian volunteer with Peacemakers of Ukraine carries a box with food to be packed for soldiers.
IMAGE: TATYANA ZENKOVICH/EPA


Ukrainian volunteers make camouflage nets and costumes for soldiers.
IMAGE: TATYANA ZENKOVICH/EPA


A Ukrainian volunteer walks past garages, some of which are serving as a storehouse for humanitarian aid eff
orts.

Russia's media machine looks West

Radio Free Europe/Radio Liberty: 29. December 2014
By Glenn Kates


An elderly man looks through a newspaper at a kiosk with Russian newspapers displayed outside in the Crimean port of Sevastopol on March 27, 2014.

It's May 2 in Odesa and a doctor is trying desperately to rescue pro-Russian protesters -- more than 40 of whom will die -- trapped in the Ukrainian city's labor-union building.
"As a doctor I rushed to give help to the one who could be rescued, but I was stopped by pro-Ukrainian Nazi radicals," he writes on Facebook, using a slur repeated relentlessly by Russian public figures and media to describe Ukraine's new rulers following the February ouster of President Viktor Yanukovych. "One of them pushed me rudely, promising that soon I and other Jews of Odesa are going to meet the same fate."
A gripping account, but a fake one. The Odesa "doctor" did not exist. The person who posted the story had used a photo of a dentist based 2,000 kilometers away in Russia's Karachai-Cherkessia Republic and the page soon disappeared.

No matter; the post had spread widely online and made its way into mainstream Western media with an opinion piece by journalist John Pilger in "The Guardian." 

2014 was the year Kremlin-backed media went global. In Russia, state television painted a picture of a vengeful and immoral West encroaching dangerously on Russia's "historic" sphere of influence, while Moscow expanded foreign-language outlets like RT and created a new information agency to prompt what some have called a new "information war."
It is not clear if the Odesa doctor was an organic Internet fabrication or the result of the work of a growing number of Russian-paid "Internet trolls." But for Russian state news outlets, which appear at ease repeating Internet rumor or creating their own, it may be a distinction without a difference.

Propaganda is now Journalism

In 2014, a regular viewer of one of Russia's three main state television channels may have learned that Ukrainian soldiers crucified a 3-year-old boy in a public square in the eastern city of Slovyansk; or that Nazi-style concentration camps were being built to hold Russian-speakers in Ukraine's east; or that top Ukrainian officials were conspiring with Satanist lamb torturers. 
They're fabrications, but some 50 percent of Russians -- among an estimated 94 percent who get their news from TV -- say they trust state television more than any other source, according to a poll released by the independent Levada Center earlier this year (the next most reliable source was friends, family, and neighbors, at 20 percent).  

And Andrei Kondrashov, a host on the state-run Rossia TV channel, expressed a note of pride to RFE/RL's Russian Service when explaining state media's role in the merging of journalism and state messaging. "I wouldn't draw a strict line between these two notions, because in an age when we have two systems, two civilizations standing against each other, no one distinguishes one from the other because they merge into one," Kondrashov, said. "Now any propaganda in the media is essentially journalism." 
The state-run narrative has long dominated at home but as Russia and the West face their worst crisis since the breakup of the Soviet Union, Moscow has shown increased interest in messaging to the West as well.

In November, Dmitry Kiselyov, the country's propagandist in chief who earlier this year warned on a popular weekly program that Russia is the only nation in the world that could turn the United States into "radioactive dust," launched the Sputnik news agency, which he says will broadcast in 34 countries in 30 languages by the end of 2015. 
At the same time, the budget for RT, the pro-Kremlin international television news channel formerly known as Russia Today, is to rise to 15.38 billion rubles (some $280 million) next year. 
The outlets do not aim "to convince or persuade, but to keep the viewer hooked and distracted, passive and paranoid, rather than agitated to action," say Peter Pomerantsev and Michael Weiss, in "The Menace Of Unreality," a report for the Princeton, New Jersey-based Institute of Modern Russia, released in November. 

Winning hearts and minds?

Still, some wonder if the Kremlin's efforts abroad are actually effective.
"For the people who say it's a real danger, I wonder if they're being somewhat alarmist" says Kevin Rothrock, the project editor for RuNet Echo, a site that tracks the Russian Internet. "When it comes to really quantifying the strength or influence of this kind of propaganda no one's ever done this for me in a convincing way." 

Although RT boasts that its broadcasts are available on over 630 million TV sets around the world, there is little data on actual viewership. 
But Pomerantsev and Weiss point to coverage of the July Malaysia Airlines flight MH17 disaster as an example of how Moscow's strategy can work. 
There is strong evidence that pro-Russian separatists were in possession of a BUK missile launcher thought to have been used to shoot down the plane, killing all 298 passengers and crew. But led in the West by RT, Russian news agencies have worked to sow doubt by broadcasting a string of easily debunked theories tying the disaster to the West and Ukraine.
The effort appears aimed not at convincing casual news viewers that one side or another is responsible for the downing of the plane, but at implanting the idea that it is still an open question.

Several small-scale efforts have sprung up since March, when Russia annexed the Ukrainian peninsula of Crimea, to push back against Moscow's efforts.
Yevhen Fedchenko, the director of Kyiv's Mohyla School of Journalism, founded Stopfake.org, a website in English, Russian, and Ukrainian created to "refute distorted information and propaganda about events in Ukraine." He says sites like his should not work to "compete with the Russian propaganda machine," but to thoroughly report the news in as many places as possible.
Pomerantsev and Weiss call for a larger, coordinated strategy that would include a "disinformation charter" and "counter-disinformation editors" to push back against what they call the Kremlin's "weaponization of information."
"We're facing a challenge here that has not really been faced before," Weiss said on RFE/RL's Power Vertical podcast. "And I'm sorry to say that the Putin regime and its surrogates are incredibly adept at playing this game."

Russian economy suffers first major contraction since 2009

Reuters: 29. December 2014
By Elena Fabrichnaya and Alexander Winning


A man looks at a computer screen as he watches Russian President Vladimir Putin's annual press conference, in a public library in Moscow on December 18, 2014. 

Russia's economy shrank sharply in November and the rouble resumed its slide on Monday as Western sanctions and a slump in oil prices combined to inflict the first contraction in GDP since the global financial crisis.
The Economy Ministry said gross domestic product shrank 0.5 percent last month, the first drop since October 2009. With oil exports forming the backbone of the economy, analysts said the contraction is likely to worsen.

The slide on the oil market accelerated this month after the exporters' group OPEC refused to cut output, and prices are down almost 50 percent from a peak in June. On top of this, the sanctions imposed over Moscow's role in the Ukraine crisis have deterred foreign investment and led to over $100 billion flooding out of the Russian economy this year.
"With the current oil price we expect things to get worse. There is no cause for optimism," said Dmitry Polevoy, chief economist for Russia and CIS at ING Bank in Moscow. "This is linked to sanctions first of all, oil and the panic we saw on the market in December. The damage to the banking system and consumer sentiment will take a long time to repair."
The sanctions have severely reduced the ability of Russian companies to borrow abroad, triggering the worst currency crisis since Russia defaulted on its debt in 1998.
The rouble, which had strengthened on Friday, slumped over 8 percent against the dollar in early trade on Monday in thin trade, although it later regained some of the losses.

Overall the rouble's weakness will inevitably lead to higher inflation next year by pushing up the cost of imports, threatening President Vladimir Putin's reputation for ensuring Russia's prosperity.
Government ministries forecast the slump in oil prices will lead to a 4 percent contraction of the economy next year and that inflation could exceed 10 percent.

FALLING ROUBLE

The rouble had lost more than half of its value at one stage in December, although it has recovered since then after the government introduced informal capital controls and raised interest rates steeply.
The government issued orders to large state-controlled oil and gas exporters Gazprom and Rosneft to sell some of their dollar revenues to shore up the rouble.

Russians have kept a wary eye on the exchange rate since the collapse of the Soviet Union. Hyper-inflation wiped out their savings over several years in the early 1990s and the rouble collapsed again in 1998.
At 0944 GMT, the rouble was trading at 55.25 , much weaker than the 30-35 seen in the first half of the year but well up from an all-time low of around 80 per dollar in mid-December.
The falling rouble has prompted huge buying of foreign currency in Russia and heavy withdrawals of bank deposits, heaping pressure on a vulnerable banking sector whose access to Western capital markets is restricted by the sanctions.


On Friday, Russian authorities also significantly scaled up rescue funds for Trust Bank, saying they would provide up to $2.4 billion in loans to bail out the mid-sized lender, the first bank to fall victim to the crisis.

28 December 2014

NATO assumes that Putin could be overthrown during next year

Censor.NET:  28. December 2014


Russian President Vladimir Putin, pictured above arriving in annexed Crimea, summer 2014.

NATO experts assume that Russian President Vladimir Putin might be overthrown, reports German Deutsche Welle.

Experts are thinking over 'post-Putin' scenarios, Bild newspaper says. Western strategists believe that Russian oligarchs, who lost a lot of profits as a result of the sanctions, will force Putin to resign by the end of 2015. They will try to "reboot the country in order to save Russia".

According to the newspaper, German officials consider the possibility that Putin will be overthrown. In particular, a foreign policy expert of the Christian Democratic Union Karl-Georg Velman believes that the economic and social crisis in Russia creates a growing threat to the Putin's environment. Western experts predict that Russia's GDP gap will reach 4.5% in 2015.

Ruble fall creates turbulence for Russian airlines

Agence France-Presse: 28. December 2014
by GERMAIN MOYON

File photo of passengers waiting in the transit zone in Sheremetyevo airport terminal in Moscow
Passengers waiting in the transit zone in Sheremetyevo airport terminal in Moscow.

Their international competitors may be cheering tumbling oil prices, but the collapse in the ruble has meant major financial turbulence for Russian airlines who have expenses in foreign currencies.
The ruble has slumped by 40 percent this year against the dollar and euro, mostly due to crude oil prices falling by half in the past six months as Russia's economy is heavily dependent upon oil exports.
As jet fuel accounts for upwards of a quarter of the cost for flights, most airlines are set to see a boost to earnings.

Russian airlines also stand to benefit, but that is expected to pale in comparison to the double whammy resulting from the drop in the value of the ruble.
First, traffic on their most profitable international routes has dropped as Russians stopped travelling as their purchasing power has been eroded, not to mention ticket prices being jacked up twice by 10 percent.

Second, the airlines have considerable costs in foreign currencies -- mostly aircraft leases -- which have nearly doubled in ruble terms as the currency has slumped.

According to Deutsche Bank, Russia's leading airline Aeroflot earns 90 percent of its revenue in rubles while 60 percent of its costs are in foreign currencies.
"The situation is very serious," said Oleg Panteleyev, the editor-in-chief of the specialist website AviaPort.
"The result is obvious: as a drop in traffic is inevitable, they must return planes to lessors, reduce foreign currency costs and lower the number of planes and flights," he told AFP.

With traffic rising by 15 to 20 percent annually in recent years, Russian airlines have leased and ordered new planes from Airbus and Boeing to retire their ageing fleet of gas-guzzling Russian aircraft.
Uncertainty has hovered for weeks over the third-largest Russian airline, Utair. Unable to repay some of its debts, Alfa Bank has been trying in court to seize its aircraft.

Then this past week doubts began to surface about the finances of number two airline Transaero, which boasts a fleet of more than 100 mostly Boeing aircraft.
TASS news agency reported that it had appealed to the government for help to avoid having to suspend flights.

Holiday connections

Even if Transaero denounced the report as an attempt to destabilise it by competitors, the possibility of thousands of Russian tourists stranded abroad as happened this past summer when a number of travel agencies went bust was enough to prod the government into quick action.
Anxious to show it was moving to contain the effects of the currency crisis, the government promised to help airlines by subsidising domestic routes and providing loan guarantees to ensure airlines had access to funds.

On Wednesday Transaero was granted a loan guarantee of 9 billion rubles (140 million euros, $170 million). The same day Alfa Bank said it was temporarily suspending, "at the request of the government", its legal action against Utair in order to avoid disruptions to flights during the upcoming holidays.
The government has a clear short-term goal, according to Panteleyev: "the airlines must transport all the passengers over the holidays".

Russia nearly shuts down at the beginning of the year as most people take holiday between the New Year and the Russian Orthodox Christmas, celebrated this year on Thursday January 7.
Panteleyev said "obtaining loans is indispensable... to pay for jet fuel, airport fees and salaries, but it isn't sufficient to survive."
With the Russian central bank expecting the country's economy to contract by nearly 5 percent if oil prices remain at current levels and for there to be no recovery before 2017, there won't be an easy out for airlines.

Complete upheaval

Deputy Prime Minister Arkady Dvorkovich warned airlines that the government aid would not help unless they optimised their fleet and routes and cut costs. Their owners would also have to pump money into them, he said.
Alexei Khazbiyev, a transportation specialist with the magazine Expert, also sees dark clouds ahead for Russian airlines.
"Next year, the traffic on international flights will continue to drop and the airlines will reduce their number of flights," he said.

Khazbiyev estimated that a majority of Russian airlines will lose money and several smaller regional companies may go bust, as happened in 2008-2009.
Air transport expert Elizabeta Kuznetsova wrote in a recent commentary in the business daily Kommersant that even if the state measures "soften the pain" for airlines there risks being a "complete upheaval in the market" in 2015.

Moscow offers to sell Kyiv stolen coal as nuclear shutdown adds to Ukraine’s energy woes

Kyiv Post: 28. December 2014
by Maxim Tucker


A miner works at the Kalinovskaya-Vostochnaya coal mine in the eastern Ukrainian city of Makeevka near Donetsk on Dec. 23, 2014. (AFP)


One of six reactors at the Zaporizhia nuclear power plant had to be shut down today after an electrical malfunction, adding to Ukraine’s energy difficulties as temperatures plummeted over the weekend. The incident is the second reactor shutdown at the power station in the past month.
Plant operators stressed that the incident was not dangerous and had not led to an increase in radiation, but with the country fast running out of fuel for its conventional power plants, problems with its largest nuclear station will be particularly unwelcome.

The Zaporizhia plant provides more than 22 percent of Ukraine’s electricity supply, already disrupted by the conflict in the country’s east. On Dec. 5 Energy Minister Volodymyr Demchyshyn warned that the nation’s power plants had less than one month’s worth of coal left, forcing them to work at reduced capacity.

Coal mines in the self-proclaimed separatist republics in the Donbas typically provide the bulk of the fuel for fossil fuel power plants, but no longer serve the rest of the country.
Instead, Kremlin-backed insurgents are transporting large quantities of coal from Ukraine to Russia, which has now offered to sell the coal back to Kyiv. On a number of occasions OSCE monitoring mission in Ukraine have observed “high numbers of dumper trucks transporting coal from the Luhansk region to the Russian Federation.”

The observation was followed shortly afterwards by Moscow’s announcement that it would prove Russian President Vladimir Putin’s "goodwill" towards Ukraine by selling the administration in Kyiv coal without prepayment.
“Against all the odds as President Putin said earlier in the hard times he had never given up the consistent policy towards supporting the Ukrainian people and providing real and not eventual support,” presidential spokesman Dmitry Peskov said on Dec. 27.
“Due to the critical energy situation Putin took a decision on such supplies regardless the absence of prepayment, which is the condition of making them.” 

Mines in the Donbas produced 14.4 million tones of coal in 2014, according to Interfax Ukraine news agency, and 680,000 tons between Dec. 1 and 18, roughly double the amount Russia is now offering to sell to Ukraine.

Moscow is willing to sell 500,000 tons of coal to Ukraine per month, according to Russian Vice Prime Minister Dmitry Kozak.
"If an additional corresponding agreement may be reached, we're ready to supply another 500,000 tons, totally 1 million tons of coal, to Ukraine in order to help it solve energy problems," he told Rossiya24 TV channel.
Russia’s interest in Ukraine’s energy problems comes after a week in which Ukraine twice shut down energy supplies to Russian occupied Crimea, accusing the peninsula of exceeding its agreed usage limits.


Reuters: 28. December 2014
Russia is selling Ukraine coal it has been taking from Donetsk

Russian President Vladimir Putin walks into a hall before addressing journalists after he met his French counterpart Francois Hollande at Moscow's Vnukovo airport, December 6, 2014. REUTERS/Maxim Zmeyev
Russian President Vladimir Putin walks into a hall before addressing journalists after he met his French counterpart Francois Hollande at Moscow's Vnukovo airport, December 6, 2014.

Russia has agreed on a new deal to supply coal and electricity to Ukraine, which is struggling with a lack of raw fuel for power plants due to a separatist conflict in the industrial east, Russian officials said on Saturday.
The move comes a day after Kiev said it would suspend train and bus services to Crimea, effectively creating a transportation blockade to and from the region annexed by Moscow in March this year. Kiev has briefly cut off electricity to Crimea before.

Russia will supply coal and electricity to Kiev without advance payment as a goodwill gesture from President Vladimir Putin, his spokesman Dmitry Peskov told TASS news agency.
"Putin made a decision to start these supplies due to the critical situation with energy supplies and despite a lack of prepayment," Peskov said.

Russia plans to supply 500,000 tonnes of coal to Ukraine per month, Deputy Prime Minister Dmitry Kozak told Rossiya 24 television. It is ready to supply another 500,000 tonnes per month if an additional agreement is reached, he added.
Ukraine's coal reserves stand at 1.5 million tonnes compared with normal winter stocks of 4-5 million tonnes, according to energy ministry data.
The country used to be self-sufficient in electricity, but months of fighting a pro-Russian uprising has disrupted coal supplies to thermal power plants, which had generated around 40 percent of its power.
Last week Ukraine's energy minister, Voldymyr Demchyshyn, said he was holding talks with Russia's energy ministry on coal and power supplies. Earlier attempts to import Russian coal have been hampered by supplies being held up at the border.

Supplies will come at Russian domestic prices, Kozak said, adding that he hoped the move would help ensure reliable energy supplies to Crimea.
He did not say whether the transportation hold-ups at the border had been resolved.
Russia will also supply electricity to Ukraine, Kozak said, without giving supply volumes.
Kiev's pro-Western government has accused Russia of orchestrating the rebellion in Ukraine's east, a charge Moscow denies.

Red Cross official says Moscow used ‘humanitarian’ convoys to ship arms to militants in Ukraine

The interpreter (Russia): 28. December 2014

View image on Twitter
Unfortunate info of how International Red Cross got itself into Russia's "aid convoy" scheme in Ukraine

Igor Trunov, the head of the Moscow city office of the Russian Red Cross, says that the Russian government used what it called “humanitarian convoys” to “most likely” ship arms to pro-Moscow fighters in Ukraine, in direct violation of international humanitarian law and practice.

Trunov said December 25 that he doesn’t like to “cast stones” at the Russian government. But “there is international law,” and Moscow has violated it. Using humanitarian convoys to send arms across an international border is “an invasion” and “a violation” of the law.

There are also many different reports of witnesses saying that convoys deliver projectiles for multiple launch rocket systems. 

Given the way in which Russian officials oversaw these convoys, it was possible for them to carry whatever Moscow wanted, including arms and military personnel, the Red Cross official said. Such actions, he said, make it far more difficult to ensure the delivery of real humanitarian assistance of the kind his organization provides to people in Ukraine who need it.

Trunov’s declaration follows confirmation by Russian activists that they sent armed militants into Ukraine via these convoys And his words suggest that Moscow may very well continue to do so even as it talks about its supposed support for the territorial integrity of Ukraine.

25 December 2014

Oil's swift fall raises fortunes of US abroad

The New York Times:  25. December 2014
By ANDREW HIGGINS



Pump jacks are seen at dawn in an oil field over the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom on March 24, 2014 near Lost Hills, California.

A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis.

The nearly 50 percent decline in oil prices since June has had the most conspicuous impact on the Russian economy and President Vladimir V. Putin. The former finance minister Aleksei L. Kudrin, a longtime friend of Mr. Putin’s, warned this week of a “full-blown economic crisis” and called for better relations with Europe and the United States.

But the ripple effects are spreading much more broadly than that. The price plunge may also influence Iran’s deliberations over whether to agree to a deal on its nuclear program with the West; force the oil-rich nations of the Middle East to reassess their role in managing global supply; and give a boost to the economies of the biggest oil-consuming nations, notably the United States and China.


It might even have been a late factor in Cuba’s decision to seal a rapprochement with Washington.

After a precipitous drop, to less than $60 a barrel from around $115 a barrel in June, oil prices settled at a low level this week. Their fall, even if partly reversed, was so sharp and so quick as to unsettle plans and assumptions in many governments. That includes Mr. Putin’s apparent hope that Russia could weather Western sanctions over its intervention in Ukraine without serious economic harm, and Venezuela’s aspirations for continuing the free-spending policies of former President Hugo Chávez.

The price drop, said Edward N. Luttwak, a longtime Pentagon adviser and author of several books on geopolitical and economic strategy, “is knocking down America’s principal opponents without us even trying.” For Iran, which is estimated to be losing $1 billion a month because of the fall, it is as if Congress had passed the much tougher sanctions that the White House lobbied against, he said.
Iran has been hit so hard that its government, looking for ways to fill a widening hole in its budget, is offering young men the option of buying their way out of an obligatory two years of military service. “We are on the eve of a major crisis,” an Iranian economist, Hossein Raghfar, told the Etemaad newspaper on Sunday. “The government needs money badly.”

Venezuela, which has the world’s largest estimated oil reserves and has used them to position itself as a foil to American “imperialism,” received 95 percent of its export earnings from petroleum before prices fell. It is now having trouble paying for social projects at home and for a foreign policy rooted in oil-financed largess, including shipments of reduced-price petroleum to Cuba and elsewhere.

Amid worries on bond markets that Venezuela might default on its loans, President Nicolás Maduro, who was elected last year after the death of Mr. Chávez, has said the country will continue to pay its debts. But inflation in Venezuela is over 60 percent, there are shortages of many basic goods, and many experts believe the economy is in recession.

But the biggest casualty so far has probably been Russia, where energy revenue accounts for more than half of the government’s budget. Mr. Putin built up strong support by seeming to banish the economic turmoil that had afflicted the rule of his predecessor, Boris N. Yeltsin. Yet Russia was back on its heels last week, with the ruble going into such a steep dive that panicked Russians thronged shops to spend what they had.

“We’ve seen this movie before,” said Strobe Talbott, who was President Bill Clinton’s senior Russia adviser in the aftermath of the Soviet Union’s 1991 collapse and is now president of the Brookings Institution in Washington.

Russia’s troubles have rippled around the world, slashing bookings at ski resorts in Austria and spending on London real estate; spreading panic in neighboring Belarus, a close Russian ally; and even threatening to upend Russia’s Kontinental Hockey League, which pays players in rubles.

Venezuelans waited outside a market in Caracas in October to buy basic items like diapers and detergent. Their economy relies almost entirely on oil revenue.

“It is a big boost for the U.S. when three out of four of our active antagonists are seriously weakened, when their room for maneuver is seriously reduced,” Mr. Luttwak said, referring to Russia, Iran and Venezuela.
The only major United States antagonist not hurt by the drop in oil prices is North Korea, which imports all of its petroleum.

David L. Goldwyn, who was the State Department’s international energy coordinator during President Obama’s first term, warned that an implosion of Venezuela’s economy could hurt the Caribbean and Latin America in ways that the United States would not welcome.
But “on balance, it’s positive for the U.S.,” he said of the low price of oil, because American consumers save money, and “it harms Russia and puts pressure on Iran.”

Even some of the indirect consequences of the price slump, like last week’s break in the half-century diplomatic logjam between Washington and Havana, have generally worked in the United States’ favor. Fearful that Venezuela, its main benefactor, might cut off supplies of cash and cheap oil, Cuba sealed a historic deal that has in turn lifted a shadow over the United States’ standing in much of Latin America.

Another casualty of the price collapse has been Belarus, a former Soviet territory long reviled by American officials as Europe’s last dictatorship. It produces no significant amount of crude oil itself but has nonetheless taken a big hit. This is because its economy depends heavily on the export of petroleum products that Belarus produces using crude oil supplied, at a steep discount, by Russia.

Marwan Muasher, a former foreign minister of Jordan who is now a vice president at the Carnegie Endowment for International Peace, predicted another domino effect in Syria as Russia and Iran find it difficult to sustain their economic, military and diplomatic support for President Bashar al-Assad.
Others speculate that Persian Gulf oil producers, though still wealthy, might trim their financial support for radical Islamist rebel groups in Syria.
Mr. Muasher said the drop in oil prices could also prod Middle East oil producers toward political and economic change by challenging so-called rentier systems in which governments derive much of their income from rents paid by foreigners for resources. “Whatever the case, it is clear that the effect of the new oil price levels will not be limited to the economic sphere,” he wrote in a Carnegie report.

Cubans received a meal at a hospice center in Havana on Sunday, a few days after the Cuban and American presidents announced plans to normalize relations.

Hard-hit anti-American oil producers have blamed foreign machinations for their woes, suggesting that Washington, in cahoots with Saudi Arabia, has deliberately driven down prices.
This view is particularly strong in Russia, where former K.G.B. agents close to Mr. Putin have long believed that Washington engineered the collapse of the Soviet Union by getting Saudi Arabia to increase oil output, driving down prices and thus starving Moscow of revenue.
In many ways, the recent price fall really is the United States’ work, flowing to a large extent from a surge in American oil production through the development of alternative sources like shale.

By offsetting declines in conventional oil production, increases in shale oil output have allowed overall American crude oil production to rise to an average of about nine million barrels a day from five million a day in 2008, according to the United States Energy Information Administration. That four-million-barrel increase is more than either Iraq or Iran, the second- and third-largest OPEC producers after Saudi Arabia, produces each day, and it has put strong downward pressure on world prices.

The geopolitical shakeout set off by the oil market has not gone entirely America’s way. Russia’s troubles have so far shown no sign of pushing Mr. Putin toward a more conciliatory position on Ukraine, and some analysts believe they could make Moscow even more pugnacious and prone to lashing out.

The Bank of England’s Financial Policy Committee, which monitors possible systemic threats, warned in minutes released this week that “sustained lower oil price also had the potential to reinforce certain geopolitical risks.” It voiced alarm, too, over an increased risk of deflation in the eurozone, the 18-nation area that uses Europe’s common currency.
The price drop could also encourage more freewheeling use of oil products like gasoline, undermining what appears to be a growing consensus among nations that carbon emissions must be reeled in to offset the most dire effects of global warming.

While authoritarian oil producers like Russia are clearly suffering, China is enjoying a huge windfall thanks to the price drop. It imports nearly 60 percent of the oil it needs to power its economy.
China became the world’s largest importer of oil in 2013, surpassing the United States, and so stands to benefit from plummeting prices. Bank of America Merrill Lynch estimated last month that every 10 percent decline in the price of oil could increase China’s economic growth by 0.15 percent.
Strong growth in China would lift demand for oil and help reduce the current agonies of OPEC, which pumps around a third of the world’s oil but, largely as a result of increased American production, has lost much of its ability to dictate prices by controlling output.

In an interview with the Middle East Economic Survey this week, the Saudi energy minister, Ali al-Naimi, indicated a fundamental rethinking by OPEC, saying that it needed to focus on keeping its market share rather than trying to raise prices by slashing production. “We have entered a scary time for the oil market,” he said.

-----------------------------------------------------------
Reporting was contributed by Stanley Reed from London; Jane Perlez from Beijing; David D. Kirkpatrick from Cairo; William Neuman from Caracas, Venezuela; Thomas Erdbrink from Tehran; and Simon Romero from Rio de Janeiro.

As ruble settles, inflation becomes Russia's next big problem

The Moscow Times: 25. December 2014


A board showing currency exchange rates is seen through festive illumination lights in Moscow, on Dec. 22, 2014.

Russia said its currency crisis was over on Thursday but warned that inflation is set to climb above 10 percent, adding to the problems facing President Vladimir Putin's government as it fights its worst economic crisis since 1998.
The ruble plunged to its lowest levels since 1998 last week on heavy falls in the price of oil, the backbone of the Russian economy, and Western sanctions over the Ukraine crisis that made it near impossible for Russian firms to borrow on Western markets.

But it has since rebounded sharply after authorities took steps to halt its slide and bring down inflation, which after years of stability threatens Putin's reputation for ensuring the country's prosperity.
Those measures included a hike in interest rates to 17 percent from 10.5 percent, curbs on grain exports and informal capital controls.
"The key rate was raised in order to stabilize the situation on the currency market … That period has already, in our opinion, passed. The ruble is now strengthening," Finance Minister Anton Siluanov told the upper house of parliament on Thursday.
He added that interest rates would be lowered if the situation remained stable.

Standard & Poor's credit ratings agency said this week it could downgrade Russia to junk as soon as January due to a rapid deterioration in "monetary flexibility."
Keen to avert a downgrade, Russia said it had started talks with ratings agencies to explain the government's actions. Siluanov said the budget deficit next year would be "significantly more" than the 0.6 percent of gross domestic product originally planned.
The ruble slumped to 80 per dollar in mid-December from an average of 30-35 in the first half of 2014. It has strengthened in the last few days to trade as strong as 52 per dollar on Thursday, in part thanks to government pressure on exporters to sell hard currency.
Russians have tracked the exchange rate closely since the collapse of the Soviet Union, when hyper-inflation wiped out their savings over several years in the early 1990s.


Inflation spike

Russia imports large amounts of food, high-tech equipment and cars. As the ruble weakens it has to pay more for its imports, which pushes up inflation at home and in turn encourages people to protect their earnings by buying dollars, thereby adding to the pressure on the ruble.
Putin's economic aide Andrei Belousov said on Thursday that annual inflation could reach around 11 percent by the end of 2014 — surpassing the psychologically important 10 percent mark for the first time since the 2008-09 global financial crisis.
Prices for some goods, such as beef and fish, have risen 40 to 50 percent in recent months after Russia slapped an import ban on certain Western food products in retaliation for European Union and U.S. sanctions over Ukraine.

Bank officials say they saw a spike in withdrawals from ruble deposits in mid-December as Russians rushed to convert their savings into hard currencies.
The deputy head of top state lender Sberbank, Alexander Torbakhov, said this week that demand for hard currencies spiked to five times usual levels last week, when the ruble plummeted to all-time lows.
But he added that the bank had seen depositors returning in large numbers after most lenders ramped up their deposit rates, some offering as much as 20 percent in annual interest.
"We have managed to cope [with deposit withdrawals]. Can the situation be repeated? Yes, it can," Torbakhov said, declining to discuss what could trigger a new flurry of withdrawals.

Analysts say that apart from oil prices, they will watch ratings agency decisions.
S&P warned this week there was at least a 50 percent chance it would cut Russia's sovereign rating below investment grade within 90 days. Moody's ratings agency warned this week that Russia's GDP could contract by 5.5 percent in 2015 and 3 percent in 2016 due to weaker oil prices and the ruble's slide.