Thursday, March 29, 2018

Issue 17



The mysterious assassination attempt, using a rare neurological agent, on former Russian military intelligence officer turned British agent, Sergei Skrypal, and his adult daughter Julia in a Salisbury park triggered an unprecedented uproar not only in the United Kingdom but world-wide. London's reaction, unlike in 2006 when another high profile Russian intelligence defector Alexander Litvinenko was poisoned with the exotic Polonium-210 agent, was swift and decisive: 23 Russian diplomats were expelled, the visa regime for Russian visitors was tightened and the UK announced a boycott of the Soccer World Cup in Russia by its high-level officials, not the team itself. The Russians reciprocated immediately. They expelled 23 British diplomats, closed down the British consulate in St. Petersburg and suspended the activities of British council in Russia. The UK was thereafter successful in organizing a collective response that has seen so far the expulsion of over 150 Russian officials from over 25 countries.

The initial version offered by Prime Minister May blamed Russia for the attempted murder. Foreign Minister Johnston went further: he accused Putin directly. The truth that will come out sooner or later will probably be more complicated. The wild world of intelligence services very often plays its dangerous games outside political considerations. Moreover the structure of Russian power radically differs from your average Western European state: in Russia, the Intelligence services, rich oligarchs, criminal world and some echelons of power often intersect in unusual ways. It is not unlikely that this brazen assassination attempt came from within those murky structures and could have been designed as an act of vengeance or an act of sabotage, or even an act of insubordination. For the time being, what matters though is that Western public opinion sees a direct link between Putin and the poisoning incident. Whether it is direct guilt or a more general liability is of limited relevance at this stage. It is unlikely as well that we will get any clarification on the questions of timing and motivation, at least in the near future.

PM May in Salisbury, March 15th
© Facebook 
The poisoning itself is, however, no longer the main story. Previous allegations of Russian misbehavior have as well been invoked. The unprecedented collective expulsion of Russian diplomatic staff and the closing of yet another Russian consulate in the US are getting most of the attention. The short-term political success accruing to Prime Minister May amidst a show of European solidarity should not obscure the fact that, despite their spectacular nature, the measures taken by Western countries are so far cautiously avoiding touching economic cooperation with Russia. The hope might be that once the dust settles over the incident it will be ‘business-as-usual’ again. The upcoming Russian counter-measures may not allow for that.

In the specific case of Britain, a lot of Russian money is concentrated in London with scores of Russian billionaires roaming the streets with massive investments in every sector of the economy. Even if concrete measures are not immediately taken by the British authorities against this type of foreign investor, the extra scrutiny, the possible threats and the overall atmosphere may significantly alter the situation. According to latest information one of the top Russian billionaires, Roman Abramovich, who resides in London and is owner of Chelsea soccer team, and Igor Shuvalov, the first deputy prime minister of Russia who owns some prime real estate in UK, are already under investigation.



March 18 celebrations, Moscow
© President of Russia Website
No one doubted that Vladimir Putin would be re-elected for a fourth term, making him the longest serving Russian leader since Stalin. Few people however expected such a high turn-out (67%) and the stratospheric percentage of the vote (76%) collected by the incumbent. It was particularly interesting that this time around all registered candidates had free and unrestricted access to TV time and other forms of media. At the same time the main opposition candidate, Alexei Navalny was banned from running due to a criminal conviction that many believe was politically motivated for the very reason to prevent him from participating in elections. The Levada polling center calculated that even if Navalny had been allowed to run, he might have raised the opposition participation level, but his numbers were probably enough to take a distant second place (around 10% of the vote). Surely that would not have been enough to change the overall result.

March 18 celebrations, Moscow
© President of Russia Website
The outcome of the Russian elections deserves serious analysis. What is evident right away is that massive anti-Russian (more precisely anti-Putin) stand and rhetoric of the West brought Russians together and solidified their support for Putin as reflected in the high turn-out and Putin's personal numbers. The feeling of "besieged fortress" is something that is deep within Russian history and mentality from Czarist times to the Soviet reality and all the way to the modernity (the post-Soviet collapse and expansion of NATO for example). It has been proven time and time again that the soft power approach in West East relations worked better.

Most probably the upper echelons of power will undergo certain changes after Putin's inauguration. Premier Medvedev could be moved from his post to the position of the Constitutional Court Chairman. At 80, Valery Zorkin, the current chairman will soon retire. Two senior members of government will most likely keep their positions: Sergei Lavrov, the irreplaceable voice of Russian diplomacy and Sergei Shoigu, the very capable Defense Minister.

Putin's first order of business will likely be to address the challenges of the Russian economy in the negative post-Skrypal international context. The recent horrific fire at Kemerevo shopping center in Siberia that took lives of 67 people, mostly children, substantial undermined Putin's post election joy. 



The Arbitration Institute of the Stockholm Chamber of Commerce conducts its dispute resolution process procedures on a confidential basis. The Institute itself does not acknowledge the handling of a dispute. It does not publish its decisions. To find out what happened you have to look at the reaction of the parties. In the case of its dispute with Gazprom/Russia, Naftogas/Ukraine was quick to announce its February 28th victory and its expectation that it would soon receive the 2.5 billion that Gazprom was ordered to pay. Gazprom immediately complained that the decision was based on asymmetric principles and that it should not be expected to foot the bill for the decline of the Ukrainian economy. The arbitrary decision would indeed seem to have given some weight to the argument that Ukraine could justify buying less gas than originally foreseen on account on a lower domestic demand. It accordingly lowered the minimum amount of gas Ukraine had to purchase from 41.6 billion cubic meters to 4.

Gazprom quickly announced its intention to appeal the decision of the Stockholm arbitration institute (through a local Swedish court) as well as its intention to end its contract with Naftogaz. President Poroshenko, hailing the Stockholm decision as a major victory, suggested Ukraine might seize Gazprom assets in Ukraine. That process is apparently under way.

The Russian position as the supplier of gas is relatively simple. The more pipelines the better, be it Nord Stream 2 across the Baltic Sea or Blue Stream through Turkey. The president of Gazprom stated as well that, should Ukraine demonstrate the economic viability of continuing the transit of Russian gas through Ukraine, Gazprom would be ready to consider such a proposal.

Nord Stream ship laying pipes in the Baltic Sea
© Nord Stream

The Ukrainian position is a bit more complicated. Even though it is ostensibly dismantling its economic relationship with Russia, it wants to continue as a transit area for Russian gas to Western Europe. It is firmly against the construction of Nord Stream 2, that it considers would offer unwelcome competition and make Soviet-era transit installations on Ukrainian territory less essential, if not obsolete. The problem is that as transit country, Ukraine is in a fundamentally weaker position. In making its case it has to argue that the transit of Russian gas on its territory is important for Europe, but that Russian gas going through Nord Stream 2 is somehow dangerous for Europe, as if the transit of Russian gas through the old pipelines somehow cleansed it of some sulfurous odour and made it less of a threat to European energy security.

Landfall of Nord Steam1in Germany
©Nord Stream

The Stockholm decision may have been a clear victory for Ukraine. At the same time, by making it less attractive for the Russian supplier, it may well have sealed the fate of Ukraine as an important long term transit area for Russian gas. Even more important, it may well even further reinforce the view, especially in Germany, that a direct intermediary-free and conflict-free line such as Nord Stream 2 is a desirable long-term objective, despite the objections of Ukraine, Poland, the US and even Canada.



Mikheil Saakashvili is still running an anti-Poroshenko opposition campaign from his Western European exile, but he briefly had serious competition for public attention from an unexpected source in the person of Nadia Savtchenko.

Nadia Savtchenko, 2017
© Wikipedia
Savtchenko has an unusual curriculum vitae: she is a military aircraft pilot, was peacekeeper in Iraq, was member of the private battalion Aidar fighting in Eastern Ukraine, was captured by Donbass rebels, was convicted in Russia for having been instrumental in the killing of two Russian journalists, achieved celebrity as a prisoner-of-war, was elected to the Ukrainian parliament during her captivity, was exchanged back to Ukraine for two Russian military intelligence officers, was given the honorary title of Hero of Ukraine. In December 2016 she left former Prime Minister Tymoshenko’s political party after admitting she had secretly met with Eastern Ukrainian separatist leaders in Minsk. She has indirectly accused current lawmakers, including Parliamentary Speaker Parubiy, of having been involved in the shooting of protesters and policemen during the December 2014 Maidan demonstrations. In March 2018 she was accused by the Prosecutor General of preparing a terrorist attack on the Ukrainian parliament. She may indeed have entered the Parliament building with weapons in her possession. Criminal proceedings were initiated after her parliamentary immunity was lifted. She now sits in jail for a few months at least, unlikely to be able to run for the presidency of Ukraine in 2019, as she had announced.

As an outsider opposition candidate Savtchenko did not stand much chance to win. She would, however, have made the electoral process much livelier. As it stands now, Tymoshenko, the only political leader with a rating above 20%, looks well positioned for the March 2019 presidential election.



Rich on events the month of March began with the long anticipated firing of American State Secretary Rex Tillerson. The most average and passive State Secretary in modern history. Tillerson failed to become a counterbalance to his impulsive and superficial boss. Sometimes he tried to rebel (on the Iranian Nuclear Treaty or NAFTA for example) but did not succeed. He once mentioned to his friends that Trump was not interested in talented people around him, but those who think like him.

Mike Pompeo
Official Picture
Mike Pompeo, former head of the CIA and appointed to replace Tillerson, was described by Trump himself as a man "who thinks like me". He probably will encourage Trump to withdraw from the treaty with Iran signed by US, Russia, France, Great Britain and Germany. It will certainly deepen disagreement between US and the European Union as well as provoke Iran to become far more aggressive and persistent in its nuclear and missile re-armament programs.

As far as Washington relations with Ottawa are concerned, NAFTA will now come under bigger threat than it was in Tillerson's time. Pompeo shares Trump's that the US trade deficit in trade with Canada is seriously weakening the American economy and should be urgently balanced out.
Even in the current environment the Russians also should have very limited expectations: Pompeo is far more decisive and negative towards Russia than his predecessor who knew Russia better through decades of oil business. 

Next in line for dismissal was H.R. McMaster, National Security Adviser.  Constantly shuffling the deck is not the best way to bring about political stability. Trump thinks otherwise. It looks sometimes that he thrives on chaos and unpredictability.



Kim Jung-un recently completed his first visit outside North Korea since he took power in 2011. He took his father's armored train to Beijing where he was met with all ceremonial trappings including guard of honor. He met Chairman Xi and according to official Chinese statement Kim confirmed once again his readiness denuclearize Korean peninsula. China's support gives considerable weight to Kim's position ahead of pending summit with US President.   

In a most unusual twist, the North Korean dictator announced that he would not mind if both Koreas become a nuclear-free zone. This was immediately welcomed by Seoul. Such an announcement certainly may contribute to the success of the announced summit between Trump and Kim. It is widely believed that the CIA is leading the preparatory work for the summit rather than the State Department. This is most likely due to Trump's overall mistrust of the diplomatic establishment in general (that extended, by association, to Tillerson). The second reason for the CIA active role in doing the briefing for the summit is simple: North Korea is not your average state, but probably the most secretive and mysterious country on the planet.

It may look like Trump’s threat to use American military might against North Korea and his tough language have been rewarded. Did the Chinese finally managed to relay to Kim the full seriousness of his predicament? Was it the Chinese carrot or the American stick that worked? Or did Kim have his own plan all along.

In any event, North Korea played the Olympic reconciliation very well, completely changing the tone of the discussion. As for Kim, he now has plans for a meeting with the US President, something that neither his father nor his grandfather could achieve. The closest ever such a meeting looked possible was at the end of the Clinton presidency. At the time, North Korea only had the threat of nuclear weapons and ballistic missiles. It now has them. In addition, it has a clear defense commitment from Russia that a nuclear attack on one of Russia’s allies (there are few candidates for such) would be met by a corresponding response from Russia.

Kim goes into his meeting with Trump in a much stronger position than would have been thought possible a few months ago. The nervous reactions in the Washington foreign policy establishment were revealing, reflecting the concern that Trump had agreed to something that his predecessors had always rejected. The only thing Kim needs to achieve is an agreement to start negotiations on the denuclearizing of the Korean peninsula, a process that could well last extend beyond the Trump presidency, but that could open the door to economic assistance and cooperation that could improve his county's long-suffering economy. 

For the time being, the Korean crisis, that seemed to bring us almost on the verge of nuclear war just few weeks ago, has subsided and given place to cautious optimism and hope. The main question is whether the negotiation process will survive hawkish John Bolton’s appointment as Trump’s national security advisor.



John Bolton
© Wikipedia
John Bolton is 69 and a lawyer by education. He was America's 25th Ambassador to the United Nations during the second term of the second Bush president (2005-2006). He becomes President Trump’s National Security Adviser, effective April 9t
Bolton also held several top positions within the State Department. Currently he is a senior fellow at the American Enterprise Institute, senior advisor for Freedom Capital Investment Management, counsel to the influential Washington D.C. law firm Kirkland & Ellis and a political commentator on Fox News. Aside from that, John Bolton is involved with several conservative think tanks and interest groups such as the National Rifle Association, the Project For the New American Century, the Jewish Institute for National Security of America and the Committee for Security in The Gulf, to name a few.

If McMaster was a foreign policy realist who often clashed with his unpredictable and not too knowledgeable boss by introducing him to truth-to-reality version of world affairs, John Bolton with his credentials and Fox news mindset is exactly the opposite. Just like Mike Pompeo, newly appointed Secretary of State, Bolton shares Trump's "strategic vision" of the world. His appointment was conveniently accelerated in order to get the newcomer up the speed before crucial summit with Kim Jong-un.

The appointment of John Bolton will be welcomed in Jerusalem and Riyadh and loathed in Tehran, as it will most likely put an end to the Obama-era nuclear deal with Iran, which Trump considers grossly inadequate. Moscow will probably not care much as the relations between two nuclear giants are at such dismal point, no individual will really matter as it would only take overall change of thinking to fix that relationship.

In many European capitals, the appointment of John Bolton will be seen as pouring kerosene on open fire, but, due to their cultural upbringing, polite nature and tendency to play diplomacy, the Europeans will cringe, but take it. Maybe only in London, where another front of the ongoing Cold War 2.0  has just opened up, Bolton will be surprisingly appreciated as the truly historic Anglo-American alliance is about to get a second wind.

In conclusion, John Bolton's appointment (just as Mike Pompeo's) signals that the US is ready and willing to play hard ball on the international scene. Looking at some unresolved issues in the world and the general passivity of the previous administration on several fronts, it may be viewed as a necessary development. It can also mean a dangerous gamble.




The Chinese Communist party broke with post-Mao tradition and removed the two-term limit for the position of President of China.  This came after Xi Jinping’s political thoughts were incorporated into the Communist Party Constitution. This provides Xi with unchallenged authority and the opportunity to carry out his ambitious vision of turning China into a socialist superpower.


President Trump phoned Vladimir Putin and congratulated him, characteristically against the official advice he had received, on his victory in the Russian election. Trump also mentioned the possibility of a meeting with Russian president "in a not too distant future". During the phone call Trump avoided mentioning the poisoning of Skrypal or the fall-out from Russian meddling in the US elections, but picked up Putin’s post-election remark about avoiding a new arms race, in the aftermath of Putin’s his own recent announcement about new Russian weapons.


President Shavkat Mirziyoyev announced amnesty for all former exiles including religious dissidents and human rights activists. This follows on recently-initiated radical economic reforms and justice system modernization.


The government of Slovakia resigned as the result of massive street protests in light of the brutal murder of Slovakian journalist and his girlfriend who conducted an investigation into state corruption that involved shady dealings with Italian organized crime.


Polish government decided to claim hundreds of billions Euros from Germany as reparation payments for German occupation of Poland during WW-2. Chancellor Merkel replied that according to the 1953 treaty Germany had completed its reparation payments to Poland and all further claims are null and void. Warsaw justifies its claim by the fact that the Soviet Union forced Poland to sign the 1953 treaty. This conflict brings additional tensions to the German-Polish relations.



Ilya Gerol, former foreign editor of the Citizen in Ottawa, syndicated columnist in Canadian, US and European media specializing in international affairs. His particular area of expertise includes Russia, Eurasian Economic Union, Eastern and Central Europe.  Ilya Gerol has written several books, one of them, The Manipulators, had become a textbook on relations of media and society.

During his career in the Canadian Foreign Service, Gilles Breton had three assignments at the Canadian Embassy in Moscow. His first posting there began during the Soviet period, in 1983. His last was from 2008 to 2012 as Minister-Counsellor and Deputy Head of Mission. He also served as Deputy Director responsible for Canada’s relations with Russia from 2000 to 2008. As an international civil servant, he was Deputy Director of the OSCE Office for Democratic Institutions and Human Rights in Warsaw from 1994 to 1997.