THE BRETON/GEROL NEWSLETTER
To BGN
readers: The second issue of the Breton-Gerol Newsletter comes to you in the very
last days of the outgoing year. The 2017 issues will have an improved design
and appearance. Our main objective remains the same: to update our readers on
the events and developments on the international scene with particular emphasis
on such regions as Russia and Eurasian Economic Union and Central Asia.
We wish you
Happy New Year !
--o--
RUSSIA: IN ANTICIPATION OF TRUMP’S WORLD
Never in post WW-2 history was Moscow so obsessed by the ascendance of a new American president.
At the countless political talk shows on Russian TV the name of Donald Trump is mentioned just as frequently as that of Vladimir Putin. The recent quote from the popular Moscow political commentator Andrei Norkin says it all: “One thing is clear-Trump is a real friend of Russia”.
In the Kremlin however not everyone is so certain. The closer we get to the 20th of January 2017 when the word “elect” will be dropped and the Trump’s presidency will begin, the more wary the policy makers in Moscow feel. The prevalent view within the political-military establishment in Russia now is that it would not be so easy for Trump to overcome the traditional anti-Russian monolithic triad: Congress, State Department, and Pentagon. The course of foreign policy in Washington will not occur overnight even if Trump’s new administration wants to change it. That is why the Kremlin continues – with the impressive speed – to cement its international achievements of 2016: Saving Assad regime in Syria, signing cooperation agreements with Turkey and Iran, overcoming Western economic sanctions and keeping the situation in Eastern Ukraine in limbo.
So when Donald Trump becomes president he will clearly
see the consolidated positions of Moscow. At that stage the new start of
West-East dialogue could commence.
At this pending junction Canada has an opportunity to
start its own dialogue with Russia in order not to be left behind by other
significant economic players as Japan, EU, South Korea and Brazil in
calibrating its relations with Russia and Eurasian Economic Union to fit this
new reality.
THE AFFAIRS OF STATE
--o--
THE AFFAIRS OF STATE
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Rex Tillerson with President Putin and Igor Sechin, President of Rosneft, June 15, 2012, Tuapse (Krasnodar Region), Source: President of Russia Website
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The proposed appointment of Rex Tillerson as Secretary of State is eliciting an inordinate volume of comments on account of his friendship with Putin and his lack of government or diplomatic experience.
The friendship with Putin needs to be put in perspective:
while successfully advancing the interests of his corporation Tillerson managed
to gain the respect of his Russian counterparts, to the point where the Kremlin
refers to him as “highly professional”. Tillerson’s work with Russia would
confirm that it is possible for a major US entity to have a convergence of
interests with the Russian government. Not a problem in itself one might think,
but this no “zero-sum game” approach irks the Washington neo-conservative
establishment for which such convergence is inconceivable. Others even more object to the suggestion fact
that Tillerson is a friend of Putin, or in their view a friend of the devil
incarnate. The implication is that Tillerson lacks judgment in picking his
buddies. If indeed Tillerson became friends of sort with Putin, it is mainly
because his work took him to Moscow when the entire Western business community
was courting Russia and he was successful in building contacts in Russia.
Altogether, it might not be so negative to have an international business professional
with close contacts in places like Moscow and Beijing – to solve potentially
difficult issues.
The work that Tillerson successfully did at Exxon
requires skills that are easily transferable to his proposed new job. Tillerson’s
proposed appointment is consistent with President-elect Trump’s main foreign
policy objective as stated during his campaign that is the advancement and
promotion of US interests. Tillerson would be expected to advance US interests,
as (ruthlessly, some have said) he did with Exxon’s throughout his career. The
implications for US policy in relation to Russia and Ukraine tend to be more
obvious and offer no comfort for Ukraine. The implications for US policy in the
tangled web that is the Middle East are less clear. Beyond the relationship
with Israel and continuing to protect the secure access to the region’s energy
resources, what US interests will Trump and Tillerson want to promote?
--o--
SANCTIONS,
COUNTER-SANCTIONS AND
AGRICULTURE
AGRICULTURE
In mid-December the EU extended for another 6 months
the sanctions it has imposed on Russia in the aftermath of the annexation of
Crimea and the military confrontation in Eastern Ukraine. The position of the incoming Trump
administration in respect to the sanctions against Russia remains to be
confirmed, but there are indications that a repeal of sanctions is more likely
than not. If not right away than in a near future.
The range of Western sanctions includes diplomatic
measures, asset freezes, travel bans, specific restrictions in relation to
Crimea as well as some economic sanctions affecting military goods, dual-use
goods, and equipment for the oil industry. They also include restrictions on
certain financial instruments and on transactions with certain entities.
In response, Russia has issued its own reciprocal
travel bans. More important, the Russian counter-sanctions adopted in August
2014 have targeted the agricultural imports from countries that had adopted the
initial sanctions: the United States, the EU, Norway, Canada and Australia.
Russian counter-sanctions seem have had a more direct
impact on trade than the initial Western sanctions. The EU sanctions were
presented as a means to influence Russia’s behaviour in the right direction,
not as a punitive measure. The idea was to target certain responsible
individuals and entities but not to affect the general population. Russian
counter-sanctions were meant to punish the initiators of sanctions. Food
exporters from the targeted countries have clearly suffered the most. For
example, Canadian pork industry lost close to a billion in sales to Russia.
Others have also been affected by the deteriorating business
climate and, in the exclusive case of Canada, by the absence of active trade
promotion.
Overall sanctions have clearly had a negative effect
on the Russian economy. According to
World Bank data, foreign direct investment in 2015 was only 10% of what it was
in 2013. The low price of oil on the world market also contributed to the
economic slowdown. It would be difficult to assess what did more damage.
In addition to sourcing some of its imports elsewhere,
Russia’s official policy response has been to promote import substitution and
to claim that the counter-sanctions were having a favourable impact on the
Russian agri-food sector.
A few observations emerge at this time:
The sanctions have had their impact on the Russian
economy, but with the rise in the price of oil and re-alignment of financial
and trade flows, that impact is wearing off. Modest growth is expected in 2017.
The impact of counter-sanctions on the Russian
agri-food sector is conveniently over-estimated by the Russian side, it has
become clear that the counter-sanctions planned or not, were a clever means to
give a boost to the domestic agri-food industry which was already improving
significantly in any event. As of this year, Russia’s value of agricultural
exports now exceeds that of its military exports, a sign of the growing
vitality of the agri-food sector.
The Western sanctions have not caused the desired
policy change in Russia. Neither will their continuation.
The situation in Ukraine and Crimea has not changed
significantly, but with a Trump administration whose proposed Secretary of
State is openly in opposition to Russia sanctions, as well as with the already strong
dissenting views within the EU, the future of sanctions is far from certain.
--o--
PERSONALITY IN FOCUS:
LUKASHENKO’S CHOICE
President Lukachenko and President Putin, November 22, 2016, Moscow, Source: President of Belarus Website
Aleksandr Lukashenko, irreplaceable president of
Belarus suddenly stopped repeating the previously popular mantra of being an
unconditional ally of mother-Russia.
Now he prefers to mention “approach problems” between
Moscow and Minsk on such issues as Ukraine, relations with Europe and
integration within the Eurasian Economic Union.
Now when the Western sanctions against Belarus were
suspended, Lukashenko indicated his desire to have closer ties with the
European Union. At the same time he refuses to pay Russian set prices for its
natural gas claiming that prices and way too exuberant. It is worth to note
that Moscow’s irritation with the maverick Belarus leader is growing and we can
expect some sort of increased frictions between the two allies.
DEATH OF AMBASSADOR
Andrey Karlov, the assassinated Russia’s ambassador in
Ankara fell victim to new circle of Islamic terrorism which, according to some
experts, targets diplomats and state officials worldwide.
In Ankara it was an obvious and embarrassing lapse of
security on the part of Turkish and Russian special services. Aside from this
obvious fact a more nuanced conclusion is to be made. The assassination of
ambassadors though historically rare always had far reaching consequences. In
some cases it was a pretext for war, break of diplomatic and economic relations
or deep international complications. That’s why the international terrorism
from time to time turns to that proven tactic.
Ambassador Karlov’s murder will not undermine
relations between Russia and Turkey but at least it should force countries to
greatly improve the security of diplomats across globe-after all terrorism is a
global menace.
--o--
NEW MINISTER
OF ECONOMIC DEVELOPMENT
Maxim Oreshkin, Source: Ministry of Economic Development of the Russian Federation
The
appointment of 34 year-old Maxim Oreshkin (former Deputy Minister of Finance) as
a Minister of Economic Development of Russia (to replace Alexei Ulyukaev( who
was fired after being charged with corruption and put under house arrest) raises some interesting questions. Although Oreshkin has a positive reputation
as a reform-minded and independent, progressive economist, one has to wonder
about whether he has the chops, experience and skills to manage such key department of the
Russian government. While his
predecessor awaits the results of his prosecution for alleged corruption,
senior officials in the ministry must be wondering about their future.
This appointment by President Putin will not
necessarily embolden reformers, but might in fact incite senior ministry
officials to protect their sinecures and avoid making decisions. What this entire episode reminds one is that
in post-Soviet Russia, when the chairs are re-arranged around the cabinet
table, prospects for implementing reforms and cutting a bloated public service
slip even further away.
--o--
VISA FREE TRAVEL: KAZAKHSTAN AND UZBEKISTAN,
THANK YOU VERY MUCH
Canadians
will now be able to visa-free travel to Uzbekistan and Kazakhstan for up to 30
days (in same cases visas could be obtained at airport on arrival). Do not expect a reciprocal measure from Canada
as long as there is the risk of a large influx of unfounded asylum applications
from the two countries.
EU AND UKRAINE VISA -FREE TRAVEL: READ THE FINE
PRINT
The
announcement of visa-free travel to the EU for Ukrainian citizens may have been
perceived as visa-free travel being a fait accompli. Not exactly. Negotiations
still have to be conducted between the EU Presidency and the European
Parliament. The visa-free travel would also be accompanied by a new improved
suspension mechanism that would allow the re-introduction of visas if, among
other situations, there is a rise in unfounded asylum applications.
.
ALEPPO, UNDER INTERNATIONAL OBSERVATION
Russia’s
agreeing to UN-led international observation mission in Aleppo may not have
been so difficult. With the military initiative on the Syrian side and its
allies and with most of the fighting done, an international presence condones
the status quo and shifts of the responsibility for humanitarian assistance to
a broader group. It also relieves Russia and Syria from carrying all the
opprobrium for the disastrous situation in East Aleppo. The observation mission
may be difficult to put together, but may be there for a long while
ALL-SYRIA PEACE TALKS IN ASTANA
The idea
sounds far-fetched, but would not have been proposed if there was not something
serious behind it. Negotiations held in a secular but predominantly Muslim
country may not be a guarantee of success, but may be more acceptable to some
of the factions.
PUTIN ON LEAVE
President
Putin recently alluded to his wish to travel the world once he leaves the
presidency. Coming from an individual who generally does not say things without
a reason, this is intriguing. The next presidential election is less than 15
months away.
