Wednesday, July 31, 2019

Issue 33

THE BRETON/GEROL NEWSLETTER



NO END TO THE DEMOCRATS' WAR AGAINST TRUMP


As if his report was not enough in itself the US House of representatives led by Democrats invited the retired FBI director Robert Mueller to a marathon of testimonies in front of two committees. His testimony basically repeated the main points of his report's 444 pages that Donald Trump or people close to him were not guilty of colluding with Moscow during the 2016 presidential campaign. On the question of obstruction of justice, Mueller testified that the President could not be totally exonerated. He even made it clear that the President could be indicted once he leaves office. There may have been too much legal nuance in this for the full meaning of that statement to register with the audience.



Members of Congress continued to demand from White House the full of disclosure of Trump's one on one conversation with Putin during their summit in Helsinki last year. The White House refused to provide the content. The Congress for the third time tabled a Trump impeachment resolution. Though only 90 or so members voted for it, it shows that the crusade against Trump has become an obsession of the Democratic political establishment. This strategy is unlikely to help the Democratic party reclaim the White House in 2020. A credible candidate from a new generation of politicians might do that.

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UKRAINE THAT WAS NOT, UKRAINE THAT COULD BE



The significance of the overall victory of President Zelensky’s party in the July 21st parliamentary elections cannot be overestimated. For the first time since Ukrainian independence in 1991, there will be political alignment between the Presidency and the Parliament. Admittedly, there was a relatively low turnout on July 21st, just below 50%. There are many possible explanations for such a low participation, from voter disaffection to the summer timing of the poll. Clearly though, the issue was not the popularity of President Zelensky who continues to keep a very high public opinion rating.

The results of the elections are an unmistakable rejection of the professional political class that essentially controlled the outgoing Parliament. Previous parliamentarians may have been duly elected, but they clearly no longer reflected the preoccupations of the electorate. The verdict is clear and, in some cases, brutal.

The mass arrival of new parliamentarians with limited political or even public life experience may cause the new assembly to go though unavoidable growing pains. This will be a small price to pay to have a parliamentary majority that focuses on the interest of the country and is not beholden to any oligarch.

To Russia, there may be a temptation of reading too much in the fact that the nationalist tendency in the new parliament will be greatly diminished. This in no way implies that there is a return to the “good old days”. Zelensky and his party may not define their objectives as against Russia, they will no less defend Ukrainian interests. They may, however, do so in a more pragmatic way, not only to spite the other side. The possible discussion about the reinstatement of direct flights between Ukraine and Russia is a case in point.

The fact that an openly pro-Russia party did well in the Eastern regions that border on the conflict area in the Donbass should neither be discounted nor exaggerated. These regions would still perceive a normal relationship with Russia as important for their long-term prosperity, but it does not alter their sense of belonging to a different country. They do not seek to rejoin the Russian Federation. There is nevertheless some irony in the fact that the pro-Russia party did better at the national level overall than former President Poroshenko’s party.

Poroshenko’s party did however gather slightly more votes than Zelensky’s among Ukrainian voters outside of Ukraine. The diaspora may not be so comfortable with Zelensky as it was with Poroshenko. Zelensky may be saying all the right things when it comes to the conflict with Russia, as he did during his early July visit to Canada, but he clearly does not have the same nationalist credentials or inclinations. His first language is Russian, his Ukrainian not so strong. His statement on the 1031st anniversary of the Christianization of Kievan Rus called for dialogue between churches “so that faith would unite Ukrainians rather than divide them”. This is very different from Poroshenko’s rhetoric. The statement was immediately welcomed by a representative of the Church supported by the Moscow Patriarchate.

Most important, the two main tasks now awaiting Zelensky are fighting corruption and ending the war in Donbass.

President Zelensky during a working visit to the Cherkasy region, July 31st
©President of Ukraine Website


On corruption, the work has already started. Within the limit of his constitutional authority, the President has already released some senior officials from their duties. He also made several visits to the regions, taking the opportunity to chew out local politicians for their ineffectiveness. Once the new Parliament is functioning, he will be able to move more broadly and appoint new personnel to key top positions, including that of Procurator General. The Presidential Administration has already prepared an anti-corruption strategy that will include the digitization of government work (to reduce the occasions for corruption) and a public education program that will promote zero tolerance to corruption.

President Zelenskyy and EU Council President Tusk visiting Stanytsia Luhanska in Luhansk region, July 7th
©President of Ukraine Website

As for ending the war in Donbass, a ceasefire is already in effect since July 21st. There have of course already been numerous violations, but the tendency is towards less military activity. There have already been some efforts to bring new life to the discussions under the Normandy format (Ukraine, Russia, France, Germany). Exchange of prisoners may be in the works. Even more important, however, will be what can be done to remove the blockade and re-establish the exchange of goods between rebel regions and the rest of Ukraine. This is part of Zelensky’s first objective of winning back popular support in rebel regions.

Altogether, the stage is set for Zelensky to carry out reforms that could substantially transform Ukraine as well as to create the conditions for ending the armed conflict in the Eastern rebel regions. From what has been accomplished so far, there is ground for optimism.

--o--

PERSIAN GULF-GULF OF TROUBLE


The conflict between Iran and the West is quickly becoming the most poignant conflict of our times. It is not only that the war may flare up at any time, but also that the Iranian drive to make a bomb and the crippling sanctions it is are under, are dividing the West. The European Union has already created new trade structures to circumvent the US sanctions against Iran and purchase Iranian oil through multiple intermediaries using various other currencies, but not US Dollars.

British ship seized by Iranian Navy on July 19th in the Strit of Hormuz


Russia meanwhile formally supports Iran, but does not associate itself with Tehran too closely. One of the possible outcomes of the current crisis could be a popular uprising of the Iranian population against the theocratic regime due to severe economic situation inside Iran. If this were to occur, it would change the whole situation in the region and beyond. 

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TRADE STATISTICS QUESTIONS


US President Donald J. Trump is the living proof that a misreading of trade statistics can lead to unfounded conclusions. In the case of the author of the “art of the Deal”, this may well reflect the view, based on his own business experience, that in any trade relation one of the parties gets done in by the other e.g. China versus the US. It may also reflect the prejudice that the only good deal is the one he himself negotiated e.g. NAFTA versus its expected replacement, the USMCA.

Trumpism aside, a careful reading of diverse trade statistics can offer interesting insights. Put together, the following three observations are of interest:

             Between 2016 and 2018 Canada-Russia overall trade increased by 36%
             Between 2016 and 2018 EU-Russia overall trade increased by 32%
             Between 2016 and 2018 overall Russia world trade increased by 37%

The interpretation that might be offered on the basis of the above is that, after the 2012 recession and the impact of the imposition of Ukraine-related sanctions on Russia beginning in 2014 had a negative impact on trade with Russia, the tendency has now been reversed. Trade with Russia is inching its way back to the maximum level reached in 2012.



The related conclusion one might also be entitled to draw from the above is that sanctions imposed against Russia and counter-sanctions imposed by Russia are no longer having much real impact on trade flows. On the basis of the strong attendance by businesspeople from all over the world at the June 2018 St.Petersburg International Economic Forum and other similar business events, it seems that such a conclusion is already broadly shared.

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PERSON OF THE MONTH,

BORIS JOHNSON




Boris Johnson has become the United Kingdom’s new prime minister — and is poised to lead the country out of the European Union.

Johnson was born in 1964 in New York City. He graduated from Eton and attended Oxford and other prestigious schools. Johnson had a successful career in journalism working for The Times, Daily Telegraph and finally as an editor of The Spectator (until 2005), before becoming the former mayor of London from 2008 to 2016.

Boris Johnson is a modern, British conservative. He is an obvious Eurosceptic, but socially a liberal. His extravagant behavior and his wit served him well and for that reason his popularity goes well beyond strictly conservative constituencies.

Boris faces perhaps the most daunting and immediate challenge of any British prime minister since Winston Churchill during World War II.

Aside form the Brexit saga, the U.K. has been pulled headfirst into a standoff with Iran, and with it a delicate balancing act between Washington and Europe in terms of how to respond to Iran. So far, exploiting UK's political mess and Brexit quagmire, as well as a very uncharacteristic passivity of the famed British Navy, Iran had the upper hand. The whole world is watching what, if anything will be done with the new PM at the helm.

There are four items on the new PM's short work list:

1. Iran
2. Brexit
3. Beating Labour Leader Corbyn at the upcoming elections (which will be hard without scoring the first two),
and distant 4th would an attempt to slightly improve relations with Russia.

He has a fan at the White House who already described Boris Johnson using his trademark phrase "great guy".

Others, on a slightly more intellectual side, for example Conrad Black who was Boris' boss at one time predict that he will be an excellent PM. The media and the left-leaning political circles are obviously not crazy about Boris. For them he is too unpredictable, too free with his language or using the Orwellian newspeak, not a "good thinker". The fact that he is liked by Trump also does not sit well with many Brits.

One thing is to win your party. Quite the other is to win the country.
It will be exciting right out of the gate. 

--o--

MOSCOW PROTESTS AND ARRESTS


From 3,500 (according to the authorities) to 20,000 (according to protesters) people participated on July 27th in an “unauthorised" protest against the exclusion of opposition candidates from city of Moscow elections to be held on September 8th. More than 1,000 people were detained during the protest. The reaction of the authorities has been to initiate criminal cases against some of the participants in order to discourage further protests. In response to the widespread Western criticism of Moscow police actions against the protesters, Russia Today compared these actions to the ones taken by the French police against the “gilets jaunes”.  More than an actual threat to the prevailing political system, the Moscow events may be a prefiguring of upcoming challenges during any power transition at the national level that should take place in 2024. 

The Central Election Commission is now reviewing the controversial applications and may find a way to reverse the previous exclusion of some opposition candidates.

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UKRAINE SHIPPING


Ukraine’s Security Service (SBU) has arrested a Russian tanker that Moscow allegedly used to block three Ukrainian naval vessels before detaining them and 24 Ukrainian sailors in November near Crimea.

According to the SBU July 25th  statement, the tanker was detained by Ukrainian authorities after it arrived under the Russian flag at the Ukrainian port city of Izmail on the Danube River on July 24.
The 15 Russian citizens on board were released and sent back home. The ship itself was formally seized under a July 29th  Court order. It will now likely become another item on the long Kyiv-Moscow negotiating list.

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CHINA'S NEW MILITARY DOCTRINE

Beijing issued a so-called 'White Book' where it spells out the main points of its new military doctrine. For the first time the doctrine mentions the nuclear weapons as an integral element of China's defense system while stressing that China will never be the first to use nuclear weapons. The doctrine also emphasizes Beijing's intentions to further develop its Pacific fleet and make it one of the most powerful in the world.

The first iteration of China's military doctrine...

China said it will require sustainable development of its military industrial complex based on its own resources.  For the first time within its military doctrine it stated that China will continue to increase military cooperation with Russia. 

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SOUTH KOREA-RUSSIA

Russia says it has carried out its first ever joint air patrol with China, prompting both South Korea and Japan to send jets in response. The Russian defence ministry announced that four bombers, supported by fighter jets, patrolled a pre-planned route over the Sea of Japan and the East China Sea.
South Korean jest jets fired flares and machine-gun warning shots when Russian planes intruded.

Japan has protested both to Russia and South Korea over the incident.

LiancourtRocks, in Japan called Takeshima, in South KoreaDokdo


The alleged incursion happened over the disputed Dokdo/Takeshima islands, which are occupied by South Korea, but also claimed by Japan. Russian and Chinese bombers and reconnaissance planes have occasionally entered the zone in recent years, but this is the first incident of its kind between Russia and South Korea.

Russian Defense ministry said two of its Tu-95 strategic missile-carriers had joined two Chinese Hong-6K strategic bombers on the pre-planned route over "neutral waters". They were supported by fighters and A-50 and Kongjing-2000 airborne early warning and control aircraft.

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BELARUS 


Russian President Vladimir Putin held talks with his Belarusian counterpart, Aleksandr Lukashenko, in St. Petersburg on July 18 to discuss further integration within the Russia-Belarus Union State, a grouping that has existed mainly on paper after it was established in the 1990s.

In recent months, Putin and Lukashenko have held several rounds of talks on the integration, with the latter stressing that the partnership should be equal. Russia has been Belarus's main lender for many years and Minsk still owes Moscow large sums of money. Belarus's economy remains largely inefficient, and its external debt increased by $3.4 billion from July 2016 to October. In June, Finance Minister Siluanov said Moscow will lend more money to Belarus only after the two countries agree on furthering their integration.

President Lukashenko, Nikolai Lukashenko and President Putin at Valaam Monastery, July 17th
©President of Belarus Website


Lukashenko said after talks that he and Putin reached "agreements in principle on several issues hindering the integration between the two countries," including the price of Russian gas sold to Belarus. Earlier this year, Lukashenko told reporters Russia and Belarus still need to sort out a number of problems before talking about integration, adding that "the Russian leadership, especially the government, are not ready to go that way." In other words, despite recent positive statements, a lot remains to be done.

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GEORGIA


Russian President Vladimir Putin has rejected a parliamentary call to impose sanctions on Georgia, saying patching up strained relations was more important than reacting to provocations by "scumbags.” Talking to reporters in St. Petersburg, Putin said he would stay away from "sanctions against Georgia out of respect for the Georgian people."

"For the sake of restoring full ties, I would not do anything to complicate our relations," Putin added.
In what appeared to be a reference to a crude verbal attack on him by a Georgian TV presenter, the Russian president said there was no point in taking seriously what he called the outbursts of "some scumbags."

Putin was speaking shortly after the Russian parliament unanimously backed a resolution urging the government to draw up economic sanctions on Georgia for his approval, a move that would have sharply escalated tensions between the two countries.

On July 7, Giorgi Gabunia, a host of a news-analysis program called Postscript on the Georgian opposition-run Rustavi-2 television channel, called Putin a "stinking occupier" and a "walrus c***" and vowed that he would defecate on Putin's grave.

Gabunia's tirade against Putin came at one of the most tense periods in relations between Russia and Georgia since they fought a five-day war in 2008.

--o--



MONGOLIA


Populist President Khaltmaa Battulga, who won an early July run-off election, is a real estate tycoon who has a Genghis Khan-themed amusement park as one of his assets.The leader of the opposition Democratic Party won just under 51% of the vote, giving him the majority needed to overcome parliament speaker Miyeegombo Enkhbold of the ruling Mongolian People’s Party.

President Battulga


Some investors have been wary of a Battulga presidency because of his calls for more state control of some mines and his suspicions of China, Mongolia’s biggest trade partner. Despite past protests, he has said he will stand behind plans to build a key railway to China from the enormous Tavan Tolgoi coal mine and has praised China’s Belt and Road pan-Asian infrastructure initiative.

Battulga captured the attention of voters who feel Mongolia received a bad deal on investments, promising greater government control of strategic mines, such as Rio Tinto’s, Oyu Tolgoi copper mine.

Mongolia is a parliamentary democracy. The government is run by a prime minister, but the president has powers to veto legislation and make judicial appointments.

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THE AUTHORS

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.



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