Thursday, December 27, 2018

Issue 26




One day, as the good old fable goes, right before the New Year, the King realizes that he is alone at the Palace. In some way this story reminds one of the situation in the White House. One resignation follows another and only the famous (or notorious) intuition of the most unusual president in US history continues to amaze the country and the world. Trump's decision to withdraw American troops from Syria angered the Pentagon and Washington allies in Europe and the Middle East. The Justice Department opted to cooperate with the Mueller investigation. The trade war against China started to hurt the US economy. The US government's shutdown showed the President's inability to reach a compromise with Democrats. The ghost of impeachment is back into political vocabulary of Washington. Even the long-awaited visit to US troops in Iraq failed to change anything, but served as a pretext to remind the public that the occupant of the White House managed to avoid military service on doubtful grounds.

It looks that some old fairy tales are more real than one would like them to be.



Economic and financial sanctions have become a major policy tool, especially since the early 1990's. Usually the sanctions are leveled against countries that are deemed militarily powerful. The US has managed to turn many of these sanctions into international ones by using its influence at the UN Security Council.

The question is: were the sanctions against Moscow effective so far or not? The answer is a simple and emphatic no. The proof is the March 2018 presidential election, as imperfect as it was, which Putin won by a large margin. Putin and the direction he charted for Russia still enjoy widespread popularity in his country (though lately some cracks in his popularity are appearing) and, what is more significant and surprising, in many countries around the world from South America to Hungary. 

Red Square Christmas Scene

NATO analysts are currently debating this very issue. Some within the organization tend to believe that sanctions against Russia are counter-productive. The Russian military under various sanctions managed to significantly upgrade its military, flawlessly complete the demolition of the anti-Assad insurgency and, according to the facts on the ground, have ongoing military and economic superiority in the simmering conflict with unstable and largely ineffective Ukraine.

At the same time Moscow has not given up and is still competing with the West in Africa, Asia, and elsewhere in the Middle East. Russia remains a massive nuclear superpower and according to virtually all military assessments remains solidly Number 2 militarily in the world.

There is also an economic angle. The Russian economy is nothing to write home about, but it is holding its own with 2% annual growth. The targeted sanctions have affected the Russian economy to some extent. The mega deals between Russia and China (as well as between Russia and some of its energy clients like Germany and Turkey) have, however, to some degree compensated for the big losses incurred due to these sanctions. China and Russia signed their $400 billion gas deal in May 2014.

The effect of sanctions also contributes a great deal to the Kremlin's narrative that the West, NATO, especially its Anglo-Saxon block along with historically anti-Russian Poland and Baltic states, keep Russia under siege. The result of this is the ongoing pursuit of self-reliance. It is obvious that Russian national sentiment aligns with Russian government goals. The wrath of the average Russian is largely directed at the West, not at its own government.

As the result Russian agriculture, avionics, military industrial complex and obviously energy conglomerates and many others have done well since the sanctions (and Russian counter sanctions) were introduced.

Obviously the less powerful countries (like Iraq under Saddam Hussein or Serbia in the 1990's, and there are other examples) could be crushed by economic sanctions. Even current day Iran may suffer serious hardships. This is not the case with the Russian Federation. 

The failure of sanctions against Russia underlines not only the West's superficial analysis of the Russian realities, its place in the world and processes that were going on this country for the last 100 years, but also betrays an overly simplistic evaluation of such intricate conflicts as the one in Ukraine, Syria and even Russian attempts to meddle in the US elections.

One more point on why sanctions against Russia are misguided is the problem of inevitable double standards as, for example, Saudi Arabia or China have a basically free ticket to commit ever greater violations of international law and expect no more than a slap on the wrist. Canada is a perfect example. Trade with China and Saudi Arabia continues without interruption even as Canadian diplomats are kidnapped in broad daylight and the horror of the Khashoggi hacksaw massacre and its grizzly details still hang in the air.



The confrontation with Russia over access to the Azov sea ports and the creation of an autocephalous Ukrainian Orthodox Church receive relatively important international media attention. The two issues indeed have major long-term implications. They may not however have the same impact on the upcoming March 2019 Presidential election as a less publicized issue, Ukraine’s need for international financial assistance to make it through 2019.

On December 18th the International Monetary Fund (IMF) approved a 14-month Stand-By Arrangement (SBA) for Ukraine. The arrangement amounts to the equivalent of about US$3.9 billion. The approval of the SBA enables the immediate disbursement of about US$1.4 billion. The remainder will be available upon completion of semi-annual reviews. This follows the November 30th approval by the EU of the disbursement of the first €500 million of the new Macro-Financial Assistance (MFA) programme to Ukraine.

President Poroshenko receiving the President of the European Bank for Reconstruction and Development Suma Chakrabarti
Kyiv, December 17th
©President of Ukraine Website

The above announcements are good news in themselves. The underlying message is, however, not so good. Without international financial assistance and because of relatively high payments that are due in 2019, there was a risk that Ukraine might find itself in a default situation during the course of an election year. The EU and the US could not let that happen. It could be ironic, but is rather sad that Ukraine under Poroshenko receives in 2018 a loan in roughly the same amount as Yanukovych received from Russia at the end of 2013. That 2013 loan allegedly made Yanukovych refuse to sign the proposed agreement with the EU, a move that to a large extent precipitated his downfall.

The funds provided by the IMF also come with a considerable number of strings attached. In short, under the guise of “fiscal consolidation”, the Ukrainian government will have to run a very tight ship. It will understandably also have to continue its commitment to structural reforms. There is no dispute on that. It will, however, also have to stick to the policy of raising gas and heating tariffs. In an electoral year, the incumbent President can only hope that the negative social impact of these last measures, especially on low fixed-income segments of the population, will be felt mostly after Election Day, sometime in March. The further implication is that whoever the next President of Ukraine is, he or she may well be left with a rather difficult financial and social situation with a limited marge de manoeuvre.

After the economic decline of 2014 and 2015, the Ukrainian authorities have managed to restore macro-economic stability and produce some modest growth. Yet the poverty level, though currently decreasing, is still higher than in 2014. Per capita income is still only at approximately 65% of its 2013 maximum and, in October 2018, Ukraine was ranked by the IMF as the poorest country in Europe. The further problem is that there are few signs that Ukraine is on the way to reach the “tremendous potential” which the prudent World Bank mentioned in its April 2017 analysis. The difficult business climate, including the nagging issue of widespread corruption and the ensuing lack of appetite of foreign investors still hamper more rapid growth. 

Ukraine’s GDP per person is now estimated at USD 2,640, that of neighbouring Poland at USD 13,812. This has a direct impact of labour migration with working age Ukrainians finding employment in Poland as well as in other neighbouring EU countries and in Russia. The latest statistics confirm this and show a 36% yearly growth in remittances from Ukrainians working abroad. From a short-term financial point of view remittances are helpful. In the long term, a decreasing work force has negative implications for an early qualitative transformation of the Ukrainian economy.

In the meantime, President Poroshenko’s net worth seems to hover slightly above USD 1 billion, but that only makes him the 5th wealthiest Ukrainian oligarch. In fact, as a general rule, Ukrainian oligarchs have in the last few years fared much better than the national economy. In these circumstances, it is rather difficult for the Ukrainian electorate to believe that the current leadership is truly committed to increasing national wealth rather than the private fortunes of the oligarchs.



In general, Canadian foreign policy has operated largely in sync with that of America and Europe, with the Canadian government acting as a loyal partner in the dominant Western alliances of the day.

At the same time, Canadian foreign policy-makers have long championed the idea that Canada should always behave cautiously and pragmatically in its deeds and rhetoric, and shy away from overly divisive or belligerent actions that could compromise the country’s reputation as a calm, conciliatory, friendly nation, or threaten the stability of its economy.

This type of predictable and safe order was thrown out of whack mainly by factors like the election of a highly unpredictable, eccentric and politically incorrect president in 2016, Russia's annexation of Crimean peninsula and its not so covert support of the Russian speaking separatists in the Eastern Ukraine (a conflict that has already claimed 12,000 lives) and the rapid ascent of China into a global economic superpower, fueled by unprecedented political, military and economic growth.

President Putin and PM Trudeau at the Peace Forum
Paris, November 11th
By electing an idealistic, young Prime Minister Justin Trudeau, who right from the beginning sounded more like the president of the student union of an Ivy League university than a leader of a major country, Canada found itself increasingly confused by the events around the world. Justin Trudeau and his Foreign Minister Freeland are more at home by repeating a collection of positive soft messages on subjects of gender equality, ethnic diversity, tolerance and economic prosperity. Canada found itself face to face with Trump who pulled out NAFTA, brushing aside any attempts by Canada to reason with him. The deal was renegotiated mainly on American terms. The Canadian reaction to the complex and not at all black and white conflict of Russia and Ukraine elicited a predictable, but not very subtle response by Canada. In utter disregard of geopolitical realities Canada backed Ukraine unconditionally to the point of rejecting a sustained high-level political dialogue with Russia. This simplistic and unproductive approach betrays either complete lack of understanding of that part of the world or pure domestic reasoning aimed at securing the significant Ukrainian vote. Every Western country, especially the Europeans, understands perfectly well that the Russian-Ukrainian rift is extremely complicated. This is what happens when empires collapse: not only phantom pain, but real pain can linger for decades or even longer.  Europeans and Americans are more realistic about the importance of Russia as a major world power which borders 15 other countries and one of the 5 founding permanent members of the UN Security Council. Russia is not a country you should ignore. History's verdict is clear on this point. Eventually Canada will have to accept this reality. Besides, Canada is rather capable of practicing similar realism when it comes to countries like China, Saudi Arabia and even the United States. We do not live in an idealistic utopia. No matter how you slice, Russia may be part of the problem, but it also has to be part of the solution to major world crises.



Before the Presidential Press Conference
Moscow, December 20th
©President of Russia Website

This has become a tradition. Once a year Vladimir Putin holds a marathon press conference and pretends that he talks directly to his nation. Actually he talks to journalists, mostly the Russian ones and occasionally to their foreign colleagues. This time his performance had been designed predominantly for internal use.

He had to clarify actions, that was clearly uncomfortable for him, such as an unpopular pension reform that increased the age of retirement. He realized that his rating in Russia went drastically down and the very fact of him being in power for so long finally makes the nation annoyed. That is why he stressed that his administration and government had radically changed in recent years by including more young educated and progressive people who will bring with them the rapid growth of technology and a digitally oriented economy. Putin said that Russia must break into a "new economic league" in terms of size and quality adding that "if we don't set ambitious goals, nothing will be achieved."

Internationally Putin’s rhetoric sounded rather unchanged. He insisted that Russia had been unfairly blamed for its involvement in the US and other elections. Putin had plenty of harsh words for the West and for Ukraine's government. He noted however that Moscow welcomed president Trump’s decision to withdraw American troops from Syria. Putin signalled his country’s readiness to improve relations with Great Britain.

Was this Putin’s annual press conference the last one in his almost twenty-year long rule? Some skeptics would answer positively. We believe however that Putin had not said his last word yet.

During the Presidential Press Conference
Moscow, December 20th
©President of Russia Website



91-year old Lyudmila Alexeeva, a central figure in the Russian human rights movement for more than 40 years, passed away on December 8th in Moscow. Although she never stopped publicly challenging Kremlin authorities about human rights violations, she had agreed in recent years to serve on Russia's presidential council of human rights. This allowed her to have direct exchanges with the President himself without damaging her impeccable human rights credentials.



Natalya Solzhenitsyn at the unveiling of the monument to her husband
Moscow December 11th
©President of Russia Website

On December 11th, President Putin attended the unveiling of the monument to Alexander  Solzhenitsyn, on the occasion of the centenary of the famous writer’s birth. Solzhenitsyn’s widow, with whom Putin has met on a few occasions, was also in attendance. Solzhenitsyn’s writings have now become mandatory reading in Russian schools. One should not see too much into this, but only observe that the Russian perception of the Stalinist era is far more complex than is generally described in Western media and certainly not without its paradoxes.



©Wikimedia Commons

Annegret Kramp Karrenbauer, a strongly Catholic conservative career politician, has been elected as the successor to Angela Merkel as leader of Germany’s Christian Democrats. Kramp-Karrenbauer won by just 25 votes following an almost photo finish in the second round run-off against her main opponent, the multi-millionaire businessman Friedrich Merz.

When she won, she cried, and said she would accept the post, and thanked the party for its support and trust in her, insisting she would give new impetus to the party as it seeks to claw back the millions of voters it has lost to right wing populists and the Greens in recent years.

Dubbed a mini-Merkel , a title she is determined to discard, Kramp-Karrenbauer was not officially endorsed by the chancellor, but was clearly her favourite.

In fact, Merkel made a point of praising Kramp-Karrenbauer for her contribution to the CDU’s electoral success during her own speech to the party.

The result is seen as making it more likely that Merkel will be able to see out her fourth term until 2021. She has expressed her determination to stay on as chancellor for the remaining three years of her term in office. Polls show 56% of Germans support her decision.

In due course, if political difficulties persist and make France’s Macron a one-term president, Kramp-Karrenbauer could well be the next major European leader in the post-Brexit environment. In that respect, as Merkel, she would be the main European interlocutor on the international scene.



Acting PM Pashinian at the Kremlin
Moscow, December 27th
©President of Russia Website
As expected there was a landslide victory of acting Prime Minister Nikol Pashinian's of My Step alliance in the December 9 snap parliamentary elections. On December 16th the Electoral Commission Chairman published final official results showing that Pashinian's alliance won just over 70.42 percent of the vote. 

The former ruling Republican Party of ex-President Serzh Sarkisian failed to clear the 5 percent threshold needed to make it into the 101-seat parliament. Final official results show the Republican Party won just 4.7 percent of the vote. It acknowledged its loss on the basis of a preliminary vote count and has said it would not challenge the results.

About 49 percent of eligible voters cast a ballot. My Step's closest rival, the Prosperous Armenia Party (BHK) of businessman Gagik Tsarukian, won just over 8 percent of the vote. The liberal, pro-Western Bright Armenia, a party led by former Pashinian ally Edmon Marukian, was in third place with just over 6 percent. Another rival of Pashinian's alliance, the Dashnaktsutyun party, also failed to clear the 5 percent threshold needed to secure parliamentary seats. It won just 3.9 percent of the vote.



There have been lately very regular meetings between Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe. In September in Vladivostok , Putin had said that he was ready to sign a peace deal with Japan "without any preconditions" to end hostilities from World War II. "We've been trying to solve the territorial dispute for 70 years. We've been holding talks for 70 years," Putin said at the time. Putin added: "Let's conclude a peace agreement, not now but by year's end without any preconditions," Putin said, referring to Prime Shinzo Abe.

PM Abe and President Putin at the G20 Summit
Buenos Aires, December 1st
©President of Russia Website

It does look like Putin's deadline will be met. There may be some incremental progress, but the extreme sensitivity of territorial concessions on either side makes the negotiations over the disputed Kurill Islands a virtually unresolvable problem. Although the dispute formally prevents the signing of a Peace Agreement, even 73 years after the end of World War II in the Pacific, Japan and Russia are fully committed to the further development of their economic relationship, somehow as if sanctions did not exist.



Butyrka Prison

Moscow's notorious Butyrka detention center will be shut down by its 250th anniversary, the deputy chief of the Federal Penitentiary Service (FPS) Valery Maksimenko has announced. He said on December 17th that Moscow city authorities had made an offer to the FPS to build a new detention center for 2,000 inmates near Moscow instead of Butyrka and another detention center in the Moscow Krasnaya Presnaya  neighbourhood. According to Maksimenko, Moscow authorities could build the new jail with cells which offer seven square meters of space per inmate, which is close to European standards, in one or two years.

Many prominent Russian and Soviet men and women as well foreign nationals were among those held or killed at Butyrka. Russian anti corruption lawyer and whistle-blower Sergei Magnitsky spent almost a year in Butyrka before he was transferred to another detention center in Moscow, where he died in November 2009. Before the Bolsheviks came to power in 1917, one of the inmates was Feliks Dzerzhinsky, the founder of the Cheka, the secret police organization that preceded Dictator Josef Stalin's NKVD, the KGB, and post-Soviet Russia's FSB.

Prominent inmates include Sergei Korolyov, the  Soviet rocket and spacecraft designer, writers and poets Vladimir Mayakovski, Isaak Babel, Osip Mandelshtam, Yevgenia Ginzburg, Varlam Shalamov, as well as Alikhan Bukeikhanov, the founder of the first independent Kazakh government, and many others.




Azerbaijan joined an agreement with OPEC to lower oil out planning to produce 760.000 barrels instead of current 784.000. This move was in the planning for some time and has been confirmed as part of the Azerbaijan's annual budget framework.


President Igor Dodon entered another conflict with the Constitutional Court of his country and parliament. He refused to sign a law proposed by right wing parties banning Soviet era holidays such as Victory Day of May 9 and others. Parliament in its turn introduced a temporary ban on Mr. Dodon's fulfilling his presidential functions. The Government's structural crisis in Moldova's political system became a chronic phenomenon.


Tallinn's Christmas Fair was voted the best fair in Europe. 200.000 European citizens took part. 30 thousand voted for Tallinn. Second and third places were taken by Budapest and Strasbourg. Politics aside, Tallinn remains a top foreign destination for Russian tourists.



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.

Gilles Breton also currently serves as Chairman of the National Board of the Canada-Eurasia-Russia Business Association. The views expressed in this newsletter exclusively reflect the opinion of the authors.

Saturday, December 1, 2018

Issue 25



G20 participants prior to Gala Concert
December 1st 2018, Buenos Aires
©President of Russia Website

On the eve of the G20 Summit in Buenos Aires expectations were unusually and somewhat unreasonably high. The reality of this gathering was, however, much more subdued due to a couple of factors. The summit began in the shadow of a fresh escalation in the Ukraine-Russia conflict, this time in Kerch Strait. Due to this development, and simultaneously pressured by bad news from the Mueller inquiry, President Trump cancelled his scheduled meeting with Putin. The presence of Mohammed Bin Salman, Crown Prince of Saudi Arabia, also added to controversy. His presence proved once more that in today's political climate the double standard is the only standard. It was evident that even after the gory and premeditated murder of Saudi journalist and dissident Jamal Khashoggi (on direct orders from Bin Salman, according to the CIA) he was personally met by Trump, Macron, Putin and May. 

Mohammad Bin Salman, Vladimir Putin, Moon Jae-in
G20 Summit, November 30th, 2018, Buenos Aires
©President of Russia Website

It was business as usual. Meanwhile Putin got the cold shoulder from Trump who, despite the urgency of such important issues as the ballistic missile treaty and other non-proliferation agreements, refused to even say hello to Putin in public. It was obvious that domestic political considerations related to Michael Cohen’s plea agreement and Trump's fear of the Mueller inquiry played a key role in his overtly aggressive stance towards Russia, at least for now. The Europeans displayed a more even-handed approach. Chancellor Merkel stressed that both Kyiv and Moscow have to negotiate since there cannot be a military solution to their conflict. In contrast Chinese President Xi met Putin twice in Buenos Aires underlining a steady move of Russia into ever closer ties with its neighbour.

Canada, Mexico and the US used the opportunity to sign the new treaty replacing NAFTA, an agreement more favorable to the US, as Trump correctly predicted.

The US and China called a truce in their trade war on Saturday after President Trump agreed to hold off on new tariffs and President Xi Jinping pledged to increase Chinese purchases of American products. The two also set the stage for more painstaking negotiations to resolve deeply rooted differences over trade. The compromise, struck over a steak dinner after the G20 meeting, was less a breakthrough than a breakdown averted.



Seldom has a handshake between two leaders caused such a worldwide reaction. At the outset, let us be clear; it confirms that Vladimir Putin does not see the Khashoggi affair as a reason no longer to be a friend of Mohammad Bin Salman (MBS). What does it say about Putin’s view of the murder of the Saudi journalist? Some have argued that the President of Russia and the Saudi Crown Prince have identical views about torturing and killing journalists. There might be a few nuances to add, but that interpretation will remain the prevailing one.

A few days later, the handshake is not so much remembered for its moral implications as f or the political ones, especially in the US. The Anti-Trump group will deplore the fact that the US President and the Russian President fall in the same moral category. Pro-Trump factions, and maybe Trump himself, will be upset that the Russian President seems to have such a genuine, warm friendship the Saudi Crown Prince and, as one famous US  comedy show already suggested, that they might make fun of him in private.

A few pictures taken at the time of the Football World Cup in June 2018 would tend to confirm that the Putin-MBS handshake is the confirmation of a strong personal connection.

Half-Time Break, Saudi Arabia-Russia Game
June 14, 2018, Moscow
©President of Russia Website

Informal Chat, Saudi Arabia-Russia Game
June 14th, 2018, Moscow
©President of Russia Website


Unavoidably, the dispute over the conditions under which non-Russian vessels including especially Ukrainian military vessels can cross the Kerch strait to enter the ‘’historic waters’’ of the Sea of Azov was going to become a more serious matter at some point. The absorption of Crimea by Russia followed by the construction of a bridge linking Crimea with the rest of Russia was bound to cause a significant rift between the official legal positions of Ukraine and Russia in an area of international maritime law where conflicts are not uncommon. In addition to having to insist on free access to the Azov Sea for trade reasons, Ukraine was going to have to take issue with the Russian position at the risk of acknowledging that Crimea is de facto part of Russia. Beyond the defence of its new territorial claims, Russia was going to have to take restrictive measures with respect to transit through the strait in light of security concerns over the integrity of the bridge, a colossal infrastructure undertaking whose completion does not sit well with Ukraine. Whereas Ukraine initially moved in September 2016 to have the dispute resolved through an international tribunal, things took a different turn in on November 25th.

In light of what was described as an increasingly restrictive approach on the part of Russia, the Ukrainian authorities sent some military ships in the direction of the Kerch strait to exercise what they see their legitimate rights of passage, without effectively coordinating this with Russia as they had done earlier in the summer. The confrontation that ensued led to the capture by Russia of three Ukrainian vessels and their crews as well as injuries to some crew members. Criminal proceedings have been initiated in Russia/Crimea against the Ukrainian crews.

President Poroshenkp meeting with relatives of a captured Ukrainian sailor
November 30th, Kyiv
©President of Ukaine Website

In sending his ships, Poroshenko knew there would be an incident. He also knew that any Russian action against the incoming Ukrainian ships would be presented as an act of aggression by Russia and that all the supporters of Ukraine would join in the usual chorus. This was a no-lose proposition.

On the internal political scene, a border clash with Russia would not in itself have a major impact either on the current low rating of the president or the conduct of the March 2019 presidential election. Poroshenko, however, quickly submitted to the Parliament a proposal for the imposition of martial law in light of the’’ imminent threat of a military offensive’’ on the part of Russia. Fears were expressed by some that martial law might be used to cancel the March 2019 presidential election. In any event, the Ukrainian parliament only approved martial law for 30 days rather than the 60 requested by Poroshenko and only in half of the country, namely the areas contiguous with Russia or considered at greater risk. Assurances were offered that the election would be held as planned.

President Poroshenko
Handing over of new equipment, December 1st, 2018
©President of Ukaine Website
In resorting to the call for martial law, Poroshenko could turn a no-lose proposition into a win-win proposition. As one observer put it, if there is no Russian invasion, martial law will have prevented it. If there is a Russian invasion, even a limited one, incredible foresight was exercised.

To outside observers who may view the martial law response (and the ensuing ban on able-bodied Russian men aged 16 to 60 from entering Ukraine) as incommensurate with the naval incident or with any real threat from Russia, it would be useful to note that for many Ukrainians the idea of a Russian invasion is a far more credible reality than it generally is to foreigners.

At the domestic level, Poroshenko may have been able to burnish his image in preparation for the upcoming electoral contest, but at the price of imposing martial law. The real gain is not clear.

At the international level, some Europeans have voiced the idea of new sanctions. There would seem little enthusiasm for that. It was left to Chancellor Merkel to seek assurances from Poroshenko and Putin that the situation would not be allowed to deteriorate. Poroshenko actually claimed he sought Merkel‘s intervention because he could not get through to Putin. Merkel did not however respond favourably to the Ukrainian suggestion of sending NATO ships to the area, arguing that a military solution was not what was needed.

As could be expected, Russia, including Putin himself but not only, quickly suggested that the whole affair was orchestrated by Poroshenko to salvage his dismal re-election prospects. From the point of view of Russian national interest, there is nothing to be gained by escalating matters. Protecting the Kerch Strait Bridge already has significant costs. Any further military action would bring no benefit, but would entail monumental costs.

President Trump cancelled his planned bilateral meeting with President Putin on the margins of the G20 meeting in Buenos Aires on November 30th. Some in Ukraine will see this perceived upset for Russia as a victory and some justification for whatever happened in proximity of the Kerch Strait, as if a meeting with Trump was a favour to Putin. Chancellor Merkel confirmed that she would meet with Putin precisely to discuss the Kerch strait issue. Trump’s cancellation of his meeting is more a confirmation of his precarious political position when it comes to relations with Russia and his lack of capacity to enter into a credible discussion with his Russian counterpart. Considering Trump’s current Mueller inquiry-obsessed state of mind, the cancellation may be a blessing for all.

All things considered, Poroshenko may have scored a symbolic political victory, but could not turn the naval incident into a game-changing event either for himself or for Ukraine.

At the G20 Summit in Buenos Aires on December 1st, Merkel said she had suggested and Putin had agreed that discussions about the dispute should continue at the advisor level in the four-way Normandy format that is intended to ease tensions between Ukraine and Russia.



During Ukrainian Foreign Minister Klimkin’s recent visit to Washington, Secretary of State Pompeo said among other things: “We’ll keep working together to stop the Nord Stream 2 project that undermines Ukraine’s economic and strategic security and risks further compromising the sovereignty of European nations that depend on Russian gas.’’ Nord Stream 2 may indeed be detrimental to the interests of Ukraine, but criticising it is not doing much to advance the interests of Ukraine. Advancing the interests of Ukraine when it comes to the transit of Russian gas would imply securing a suitable contract with the owner of the gas. Furthermore there are two questions raised by Pompeo’s statement. In what way prolonging the dependence of the strategic and economic security of Ukraine on the transit of Russian gas is it in Ukraine’s long-term interests? In what way the gas transiting on a Ukrainian-located pipeline is it creating a lesser dependence than the gas transiting through the Baltic Sea?

During a recent visit to Istanbul President Putin celebrated the completion of the maritime part of the Turkish Stream gas pipeline that will eventually deliver Russian gas to Western Turkey and to Southeastern Europe. Another pipeline, Blue Stream, already delivers Russian gas to Eastern Turkey. Just like Nord Stream 2, Turkish Stream will reduce the volume of gas that needs to transit through Ukraine. There has not been the same level of criticism from the US against Turkish Stream as against Nord Stream 2, likely because Turkey as a new customer on the market could not be denied its own access to Russian gas. Yet the US is nevertheless trying to convince Southern European countries not to connect with Turkish Stream, but with little chance of success.

Presidents Erdogan and Putin
November 19th, 2018, Istanbul
©President of Russia Website

Beyond the plans and discussions over new pipelines, the matter of where Ukraine is getting its natural gas for next winter is a serious issue. There were already in early November public protests over the fact that local utilities in some cities could not turn on the public heating systems for the fact they were not in a position to pay their gas bills. President Poroshenko ordered that the systems be turned on. Public utilities and individual customers will indeed have to pay more for gas this winter. It is not clear that presidential intervention will be enough to resolve all problems. For his presidential election campaign, in addition to a political miracle, President Poroshenko also has to hope for a mild winter.



On November 29thPresident Vladimir Putin unexpectedly summoned a congress of the People's Front (strictly speaking not a political party, but a public organization headed by Putin that allows him to distance himself from the official United Russia Party headed by Prime Minister Dmitry Medvedev). In his opening address Putin proclaimed the necessity, after a decade of strengthening military defense capabilities, of dedicating comparably similar resources to the modernisation  of the economy with the emphasis on high-technology and scientific achievements.

President Putin adrdressing People's Front Assembly
Novmeber 29th, 2018, Moscow
©President of Russia Website

According to Putin, the Russian economy has grown by 1.75 % during the last 9 months. This is certainly not enough to reach the promised objective of joining the top 5 economies in the world. Russia intends to cut its military spending and to invest more into scientific research and development. Andrei Kostyn, the president of VTB Bank and probably the closest financial adviser to Putin, stated with unusual bluntness: "We have 10 years to modernize our economy, improve the investment climate and triple spending on science and education. If we don't do it we will fall behind for good".

Such a serious turnaround will certainly require improving relations with the West, with all the compromises that will come with any such process.



A group representing the major players in the Russian energy sector met with their Chinese counterparts in Beijing this month. On the agenda was the synchronization of efforts in order to create an ambitious network of power stations in both countries (where Russian Far East borders China), a system of gas and oil pipelines, search and development of new oil and gas deposits in Siberia and the Russian Arctic backed up by heavy Chinese financing in a long term development trajectory. Igor Sechin, a leader in Russia’s oil industry as the President of Rosneft and a close associate of Putin, indicated in his interview with Russian journalists that China is considering investing in the construction of the Nord Stream 2 underwater pipeline between Russia and Germany. Some American observers believe that such a decision is in response to the trade war that Trump unleashed against China.



Donald Trump’s frequent railing against the European members of NATO for, in his view, their failure to contribute their fair share of in terms of military expenditures reveals as usual his shallow understanding of complex issues. One also gets the impression that his objective is not so much to have allies spend more, but rather to have the US spend less on European territory. No wonder then that he would get upset  when President Macron recently said: ‘’We have to protect ourselves with respect to China, Russia and even the United States of America […] we need a Europe which defends itself better alone, without just depending on the United States, in a more sovereign manner’’.
Beyond the statements of the presidents there is a fundamental question about the future of transatlantic defence and as to what rapport de force will develop between EU defence institutions and NATO.

According to Lord Ismay, NATO’s first Secretary General, NATO was created to “keep the Soviet Union out, the Americans in, and the Germans down.

Trump’s criticism of his European allies casts a doubt about the Americans wanting to stay. Macron‘s statement casts its own doubts about whether the Europeans should insist on keeping them in. This is not to say that a strictly European Defence arrangement will soon replace NATO. There is, however, concern that the current US President could cause, wittingly or not, lasting damage to the overall commitment to the Transatlantic Alliance. For instance, it seems that NATO will not be holding a 70th-anniversary celebration, because as one seasoned observer put it ‘’the president of the United States cannot be trusted not to bring the temple down upon all our heads’’.



Pelosi was born Nancy Patricia D'Alesandro in 1940, in Baltimore, in a largely Roman Catholic neighborhood and the center of social and economic life for Italian-American families. She was the last of six children, and the first daughter. The family lived in Little Italy, in a neighborhood that was a loyal Democratic Party stronghold in Maryland politics.

In 1976 she worked for the presidential campaign of California's popular governor, Jerry Brown. Because of her political connections back in Maryland, she was asked to organize a "Brown for President" campaign there. Brown went on to win an unexpected primary victory in Maryland, thanks to Pelosi. Later that year he lost the Democratic Party's presidential nomination to Georgia's governor, Jimmy Carter.

The experience boosted Pelosi's reputation as a behind-the-scenes dynamo. In 1977 she became chair for the northern section of the California Democratic Party, and four years later became the chair for the entire state. She later served in a national party post as the finance chair for the 1986 congressional elections. Known for her top skills in recruiting candidates and getting them elected, Pelosi had never considered running for office herself. That changed when one of her long-time political allies was diagnosed with cancer and suggested that Pelosi run for the seat in the coming special election. It was not a local or state office, it was for a seat in the U.S. House of Representatives.

In 2002 Pelosi was elected minority whip and, in 2007, Speaker of the House.  She served until the Democrats lost their majority in 2011. Her biggest achievement at that time was her work on the Obama health care reform that was adopted in 2010. The historic bill extended health care to some 30 million previously uninsured Americans.

As the Democrats won back the majority in the House of Representatives this year Nancy Pelosi returned as Speaker. She is a strong critic of Donald Trump and has supported many liberal causes. As the Democratic Party has drifted more to the left, especially since the 2016 election of Trump, Pelosi has come to represent the voice of moderation and the values of old school Democrats. (The fact that close to 30 Democrats voted against her as Speaker highlights the future struggle within the party between moderate and more 'progressive' members.) This struggle will play out in full as the 2020 presidential election draws near. 

Nancy Pelosi as the Speaker of the House of Representatives and as one of the most influential democratic leaders will play an essential role in shaping the Democratic Party's attempt to wrestle the American presidency away from the Republicans and to make Donald Trump a one-term president or even, depending of the conclusions of Mueller investigation, start an impeachment process. 



Although she was the candidate of the ruling party, Salome Zurabishvili ‘s election as the first woman president of Georgia marks the country's entry into a new era. While the post of president in Georgia will from now on be mostly a ceremonial one, Zurabishvili’s second round victory likely means the end for former president Mikhail Saakashvili’s ideology as well as for his chances of returning to Georgia from exile. Saakashvili's presidential candidate suffered a resounding defeat.

President Salome Zurabishvili

Salome Zurabishvili was born in France to Georgian émigrés and served as France's ambassador in Tbilisi before becoming Georgia’s foreign minister in the first Saakashvili government.

Her position vis a vis Russia is less confrontational. She supports broader economic ties with Moscow while maintaining an overall pro-Western political orientation.

In the official statement from the Russian Ministry of Foreign affairs her election was presented as "a moderately positive development".



Acting PM Pashinyan

On November 24th thousands of supporters of acting Armenian Prime Minister Nikol Pashinian rallied in Yerevan ahead of next month's snap general elections. Addressing the demonstrators, Pashinian said that the movement that came to power by riding on a wave of peaceful street protests last spring "returned power to the people." 

Pashinian announced in October he was resigning from the post of Prime Minister in order to dissolve parliament and force early elections. He has continued to perform his prime-ministerial duties until a new parliament and Prime Minister are elected.

Pashinian pushed for early parliamentary elections following his bloc's landslide victory in the mayoral race in Yerevan. The objective is to unseat his political opponents in the Republican Party (HHK), who have held a majority in parliament.



Russia announced it has sent military chemical experts to Aleppo after reports that shells fired by insurgents in the Syrian city left dozens of people with breathing and vision problems. Defense Ministry spokesman Igor Konashenkov said on November 25th that specialists from Russian nuclear, chemical and biological warfare protection units had arrived at the scene of the attacks after Syrian state TV broadcast footage of medics treating people for what appeared to be injuries related to the use of chemical weapons.

The rebels rejected the allegations that they had used chemical weapons on November 24th, and instead accused government officials of staging the attack to undermine a cease-fire. Around 100 Syrians were hospitalized with breathing difficulties, Syria’s state news agency SANA and a British-based monitor said.

The Syrian Observatory for Human Rights said most have been discharged and the 31 cases that remained were not critical.

Soon after the incident, Russian Air Force struck bases of anti-Assad rebels in Idlib.

Without confirming all that Syria and Russia have said about the use of chemical weapons on Syrian territory, the incident gives some credibility to the allegations that rebels had some low-grade chemical weapons in their possession.



The chief of the rotating European Union presidency, says the "overall human rights situation” in Uzbekistan has shown improvement in the last two years.

"We see a release of most detainees who have been on the EU list of prisoners of concern. I am aware of one person who is left on that list, and it would be definitely very helpful if these lists were no longer needed and if all persons released were fully rehabilitated,” Austrian Foreign Minister Karin Kneissl said on November 22. She made the comments at a press conference with Uzbek Foreign Minister Abdulaziz Kamilov after an EU-Uzbekistan Cooperation Council meeting in Brussels. Kneissl said the European Union “will do its utmost” to support “the very ambitious reform program” the Uzbek government has launched. “It was confirmed to us in all the details that it is ambitious and we wish the government all success in order to implement it in an effective way,” Kneissl said. “What we have been observing shows that things are on the right track,” she added.

There is similar ongoing enthusiasm in the business community for committing resources to developing economic relations with Uzbekistan.



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.

Gilles Breton also currently serves as Chairman of the National Board of the Canada-Eurasia-Russia Business Association. The views expressed in this newsletter exclusively reflect the opinion of the authors.