Issue 16

THE BRETON/GEROL NEWSLETTER

RELATIONS BETWEEN WEST AND RUSSIA IN 2018: CAN IT GET ANY WORSE?

It has become trivial to compare the current crisis between Western capitals and Moscow with the lowest points of Cold War 1.0. There were, of course, situations like the Cuban or Berlin crisis in the 1960s as well as a close call in 1983 when Washington and Moscow came dangerously close to a nuclear exchange. Yet, at that time both superpowers and their blocks were relatively equal in a military sense. That was the constraining factor.

Today, in a more fragmented, unpredictable and infinitely complex world with its economic interdependence, to solve international conflicts takes more efforts and participants. While the Korean crisis looks more dangerous, the situation in Ukraine is where the divisions between Russia and the West are most acutely visible. It looks like Russia tacitly supports North Korea while it publicly continues to condemn its nuclear ambitions. South Korea makes it even more complicated when it tries to convince Washington and Tokyo to be patient with the North and leave some room for dialogue.

The Ukrainian civil war, or as Kyiv calls it, "separatist uprising", has created a serious European conflict that has marred relations between Russia and Europe and deeply involved the United States. The Minsk I and Minsk II agreements have largely failed, with both sides blaming each other. The US and Canada have begun to supply Ukraine with lethal weapons that will most likely inflame the war even further as the flow of weapons from Russia to the separatists could increase accordingly. This month could bring some hope. At the conference in Munich both sides were to discuss the possibility to bring some type of peacekeepers into the confrontation zone.

The last, but not least, dangerous spot that could trigger wider confrontation between major international and regional powers is Syria. It takes two long paragraphs to just list the number of alliances and their proxies, zones of influence and various configurations of interests that intersect there. The short list consists of Russia, US, Turkey, Israel, and Iran.

Judging by the first month and a half 2018 offers little hope that things will get better.

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THE MUELLER INDICTMENTS

In a heavily polarised political environment as that of the US at this time, the action taken by Special Prosecutor Robert Mueller on February 16th to indict the St. Petersburg-based Internet Research Agency and 13 Russian citizens for their illegal activity interfering with the US political system unavoidably gave each side an occasion to spin their story. The anti-Trump camp immediately saw the indictment as the confirmation of Russian meddling in the 2106 presidential election. Donald Trump kept repeating “no collusion”, as no US citizen was indicted for cooperation with the Russians, a point stressed by Deputy Attorney General Rosenstein.

A few observations might help put the indictment in its proper context.

The indictment is a 37-page document, but it does not provide a clear idea as to the real magnitude of the alleged criminal process. If one reads the indictment along with the evidence that was recently provided by social media managers, it looks as though the Russian effort did not amount to much if one compares it to the amount spent by the candidates themselves. The Internet Research Agency's Project Lakhta would have had a total monthly budget of roughly 1.25 million dollars. The Clinton and Trump campaigns spent a combined $2.4 billion.

Again, as Deputy Attorney General Rosenstein stated, the operation that is the basis for the indictment did not have an impact on the outcome of the race.

That which seems to disturb most US observers is the idea that the accused were intent on disrupting the US political process. No matter how much US observers see their democracy as a sacred process, but are not necessarily willing to confer the same hallowed status to the process in other countries, it is taking a rather dim view of the US democratic process to allow oneself to think that the operation that is covered in the indictment amounted to a real threat to US democracy. Granted, for the principle and regardless of the real impact, it might be seen as un-patriotic not to be upset. Yet, this is far from the equivalent of Pearl Harbour, as some have tried to argue.

The indictment will unlikely be prosecuted, as the defendants will never travel to the US or to a country from where they could be extradited to the US. The indictment was, however, useful for the Special prosecutor and the Department of Justice to ward off any idea of cutting short the Russia inquiry.

The dismissive reaction of senior Russian officials is, of course, not surprising. From a Russian point of view, the actions being reproached to the accused are not plausible. They would seem to serve no useful purpose. It is indeed difficult to find a rational explanation as to why the Russian government or private Russians could think they could influence or disrupt the US democratic process with what amounts to a pocketful of change. The Internet Research Agency is indeed a well-known troll farm that engages in online influence operations on behalf of Russian interests, and in that context uses social media. In earlier times, this would have been called propaganda. One is almost tempted to think that the problem is not with the veracity of the evidence collected by the Special Prosecutor, but with the interpretation given to it in order to fit the Russian meddling narrative.

The alleged Russian intervention that probably had some impact, even though it is also difficult to quantify, is that through which the emails of Clinton campaign chair John Podesta were made public through Wikileaks. That intervention, however, is far more difficult to prove and related indictments may not be forthcoming.

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MUNICH SECURITY CONFERENCE 2018

President Poroshenko, Munich, February 16th 2018
©President of Ukraine Website

At this year’s Munich Security Conference in mid-February, President Poroshenko seems to have met with all the people he would have wanted to meet, from the NATO Secretary General to US Congressmen. Ukraine’s traditional supporters have not changed their position of principle and will meet with the President of Ukraine. Poroshenko, however, ended up giving his “comment from Ukraine” to an half empty auditorium. That could be explained by many factors including a less than ideal timing for his address. Occasional indifference to another speech would not bear mentioning were it not accompanied by rumours suggesting that the US and the EU are “dropping” Poroshenko. Dissatisfaction with the expulsion from Ukraine of egocentric opposition leader Mikhail Saakashvili would not in itself have been enough to cause this turn of events. Yet, it could well have been the proverbial straw that broke the camel’s back. Dissatisfaction with Poroshenko has, however, been building up for some time both at home and abroad. Interestingly enough, the main opponent to Poroshenko, former Prime Minister Yulia Tymoshenko was also in Munich.

Among the meetings that Poroshenko had in Munich, the most remarkable one is probably not the one that received the most attention in Western media. Poroshenko had what was described as a constructive meeting with the new Prime Minister of Poland during which one particularly sensitive issue was discussed. There has been a lot of coverage of the dispute between Israel and Poland over the new Polish law that establishes what can or cannot be said about “Poles being responsible or complicit in the Nazi crimes committed by the Third German Reich”. Very little has appeared, however, about a controversy closer to home. The new Polish law also makes it illegal to deny war crimes committed by Ukrainian nationalists. It refers to “acts committed by Ukrainian nationalists between 1925 and 1950 which involved the use of violence, terror or other human rights violations against individuals or population groups” as well as to the fact that “participating in the extermination of the Jewish population and genocide of citizens of the Second Polish Republic in Volhynia and Eastern Malopolska [Lesser Poland] also constitute a crime committed by Ukrainian nationalists and members of Ukrainian units collaborating with the Third Reich”. Relations between Poland and Ukraine are obviously more than that controversy, but the strong diametrically opposed feelings continue to exist in both countries, complicating the political dialogue.

Another issue that was discussed in Munich was the UN peacekeeping arrangement for Eastern Ukraine. President Poroshenko continues to promote actively such an arrangement. The Ukrainian Foreign Minister had a detailed discussion of the matter with his Russian counterpart, according to the Russian side. There are, however, growing signs that some supporters of Ukraine are concerned that a Cyprus-type of peacekeeping accord, if successfully implemented, would essentially freeze the conflict for the foreseeable future, and would remove any incentive for its resolution.

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SYRIAN SHADOWS

With the fight against the Islamic State no longer being the central issue, the underlying complexity of the situation in and around Syria has become more evident. A few observations may help clarify some aspects of the conflict. First, long-term Russian objectives in Syria have not changed. Russia wishes to preserve the existing state structure for fear that the implosion of Syria would plunge the region into total chaos. This means, accessorily, keeping Assad in power. There is no special attachment to the Assad family. This has been made clear on several occasions. Second, there is not always full convergence between the positions of Russia and those of the Assad government. Whether this is a bad cop/good cop show is possible. What matters more is that Russia can be the interlocutor for the international community. This has been demonstrated in the context of the Eastern Ghouta humanitarian crisis. The Syrian government did not conceal the intention to apply in the Eastern Ghouta the same ruthless level of military force as was deployed in the case of East Aleppo. In the view of the Damascus authorities, the continuing existence of a rebel enclave in close proximity to the capital and one from where the rebels could bomb the outlying residential areas of Damascus could no longer be tolerated. (See above map. Douma is a city in Eastern Ghouta.) It will make the implementation of any ceasefire extremely difficult. Nevertheless, Russia was not fully aligned with its Syrian ally on this issue. That is why it was able to vote in favour the Security Council resolution calling for a ceasefire, still with the caveat that the cease-fire does not apply to terrorists. Sensing the slight difference of opinion, that is why thereafter Western powers called on President Putin to exercise maximum influence on its Syrian ally. This is why, after a Macron-Merkel-Putin conversation, there was the announcement by Russia, not by Syria, of a five-hour a day humanitarian corridor to allow for the departure of civilians and the provision of humanitarian assistance. Ultimately though, the resolution may have to come from the rumoured indirect negotiations between some rebel groups and the Syrian government.

Russia and Syria do, however, share the desire to see uninvited foreign troops on Syrian territory. That applies first to US troops. Although Donald Trump has recently stated that US troops should deal with ISIS and leave, there is long-term US interest in a military presence that allows to rein in Iran and to prop up a US-friendly Kurdish entity, as a counterweight to all the other less US-friendly and less-Israel friendly entities. Keeping in mind the Afghanistan precedent, it is difficult to imagine an early departure of US troops.

When it comes to the Turkish presence in Northeastern Syria, the interests of Russia, Syria and even possibly Turkey may eventually coincide. Even though Syria and Russia do not share Turkey’s animosity towards the Kurds, the Turkish objective of doing away with the Kurdish threat could possibly be reconciled with the Syrian opposition to a Kurdish entity that could permanently jeopardize its territorial integrity. This is why Russia is supporting current attempts to re-establish a political dialogue between Damascus and Ankara. The Turkish side has already confirmed that there were direct contacts between the Turkish and Syrian intelligence agencies. This could become very significant, but, once more, the Kurds may have their future decided by others.

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THE RUSSIAN ECONOMY, A POLITICAL TAKE

It is generally estimated that economic growth for 2017 in Russia will be around 1.5%, the first time in three years when growth is registered. In simple terms, the Russian economy shows resilience, but not dynamism.

The national unemployment rate is estimated at 5.2%. This would be very good, but the problem is that unemployment is virtually inexistent in large urban centres, yet considerably higher in areas such as the Causasus. Ingushetia unemployment, for instance, is estimated at 27%.

High inflation prevailed for most of the post-Soviet period. In a “new” consumer society, this has been a constant source of public concern. Inflation for January 2018 reached a record low of 2.2% well below the 4% target set by the Central Bank.

Despite the low inflation, disposable income is stagnating. The official poverty rate nevertheless decreased slightly in the first half of 2017.

The overall financial situation of the country is relatively sound. It has the sixth lowest level of national debt and the sixth highest level of financial reserves. On February 23rdth, Standard and Poor raised the credit rating of Russia from BBB- to BB+, taking the country out of the “junk” area and into investment territory.

Government expenditures are under control, with the federal budget inching towards equilibrium in 2017 and expected to be in a surplus condition in 2018. Dependence on oil revenues is slowly decreasing.

Structural issues obviously need to be addressed, even in the agriculture sector that, for instance, turned Russia into the largest wheat exporter in the world. In order to meet Innovation objectives, the economy will have to address demographic challenges, including skilled labour shortages. The continuing prevalence of state-owned enterprises, the limited availability of local capital are also factors that are seen as limiting growth.

All things considered, the Russian economy is showing some positive signs. Overall, it is moving in the right direction, albeit at a slow pace.

The relatively slow economic growth has not been an issue in the current presidential election campaign. It is becoming increasingly clear, however, that there is a growing expectation in the population that significant economic growth will return in coming years. This will be the main challenge of the (likely) last Putin presidency.

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PERSON OF THE MONTH: CZECH REPUBLIC PRESIDENT MILOS ZEMAN

Milos Zeman, aged 73, the Czech Republic’s populist president, has been narrowly re-elected in late January 2018 in a close battle against a liberal opponent.

This is significant because Zeman's campaign was conducted on a clearly anti-immigrant and even anti-Western platform, potentially steering the country in an anti-western direction.

Zeman needed a second round runoff victory against Jiří Drahos, a former head of the Czech academy of sciences, a chemist by profession. The final vote count was: 51.5% to 48.5% in Zeman's favor.

Zeman is openly pro-Putin and promotes better ties with China. Significantly he called for referendums on the Czech Republic’s membership in the EU and NATO. He is a vocal critic of Islam and believes that unchecked immigration from Muslim countries threatens cultural cohesion of Europe and undermines its security.

The above-mentioned election will unlikely change the country's politics and alliances overnight as the position of Czech president is more ceremonial and actual power here is wielded by the Prime Minister and Parliament.

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BRIEFLY NOTED

RUSSIA

The Levada center, an independent, non-governmental, polling and sociological research center in Moscow published some estimates for the upcoming presidential elections. The eight opposition candidates in combination could receive about 20% of popular vote. If Alexei Navalny, the popular opposition leader, who is banned from taking part in the election, was running, the opposition could amass nearly 40%. In the eyes of the Russian establishment that could be defined as a defeat for Putin. Stanislav Belkovsky, chief adviser to presidential candidate Ksenia Sobchak and one of Russia's leading political analysts, stated that if Putin failed to gather more than 60% of the popular vote, he would resign in the same way French president Charles De Gaulle resigned after collecting only 52% of the votes in the constitutional referendum in 1969. Most Russian observers, however, believe that Putin is slated to collect around 70% of the vote.

The Levada Center has now suspended its polling for the election, since under the new law on non-governmental organisations, it is considered as a “foreign agent” for having received some funding from abroad.

LATVIA

The Governor of Latvia's Central Bank Ilmars Rimsevics was arrested on charges of receiving and demanding bribes worth almost $200,000. Considering that Mr. Rimsevics has been head the bank since 2001, this scandal threatens to tarnish the reputation of the Latvian banking sector.

ROMANIA

The Romanian Minister of Defense and his Moldovan counterpart announced the creation of joint units as the nucleus of a potential unified army within a unified state of Romania and Moldova. The next parliamentary elections in Moldova will show whether the majority supports the reunification of the two countries. The current polls show that the Moldovan socialists led by President Igor Dodon have better chances. If they win, reunification will be put on the back burner. If they lose, great Romania may become a reality.

KAZAKHSTAN

President Nursultan Nazarbayev signed the historic law switching the Kazakh alphabet from Cyrillic to Latin letters The latter was in use in Kazakhstan before 1940 when Stalin ordered Kazakhstan's forced russification.

UZBEKISTAN

The open door policy for international business will become the main political course of the state for years to come, according to the Government in Tashkent. After many years since the Soviet industrial and scientific infrastructure was destroyed, Uzbekistan is turning to Western investors to fill the vacuum and to begin reconstruction of Uzbekistan's industrial, scientific and agricultural sectors. Starting this year the government liberalized the visa regime in order to attract foreign investors and tourists. For the latter, Uzbekistan has unique historical sites, such as the ancient cities of Bukhara and Samarkand.

NORD STREAM 2

After a long protracted political debates and strong US opposition, the natural gas pipeline from Northern Russia to Germany will go ahead as German construction permits were obtained. It will be a dual pipeline that will be laid at the rate of 3 km per day from special floating factories. Pipes will be welded and tested on ships and laid through the Baltic sea.

The main sticking point of that project was the EU concern that Ukraine could lose the transit of Russian natural gas to Europe and hard currency that it brings. In political terms the EU wanted to show support for Ukraine by opposing the Russian gas transit which bypasses Ukraine. The most active opposition to Nord Stream-2 came from Poland and Baltic countries. They do not fancy the idea that the most powerful European economy (Germany) could fall into even more substantial energy dependence on Russia's energy carriers.

Russia assured the EU that their Ukrainian gas transit will stay in place.

NORTH KOREA 

The noose is tighening. Not waiting for the Winter Olympics games to end President Trump announced a new set of crushing sanctions against North Korean shipping and scores of firms dealing with North Korea. According to Steve Mnuchin, US Treasury Secretary, this measure will significantly cripple North Korean ability to conduct evasive maritime activities, preventing North Korea from bringing coal and other energy supplies into their ports. The ships that were sanctioned are registered in North Korea, China, Taiwan, Marshall Islands, Tanzania, Panama and Comoros.

The sanctions also blocked certain companies’ assets and forbade US citizens to deal with the hermit kingdom. The $64,000 dollar question here is whether this step influence in any way the certain detente that has been developing of late between the two Koreas.

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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.