THE BRETON/GEROL NEWSLETTER
HAPPY NEW YEAR TO OUR LOYAL READERS!
LONELINESS AT THE TOP, TRUMP’S SOLITUDE
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.
--o--
SANCTIONS,
WHAT FOR?
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.
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| 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.
--o--
IT IS THE ECONOMY…
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.
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| 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.
--o--
CANADIAN FOREIGN POLICY, IN CRISIS?
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.
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| 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.
--o--
PUTIN EXPLAINS HIMSELF, ONE MORE TIME
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| 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.
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| During the Presidential Press Conference Moscow, December 20th ©President of Russia Website |
--o--
THE GRAND LADY
OF HUMAN RIGHTS
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.
--o--
THE WRITER FROM THE GULAG
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| 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.
--o--
PERSON OF THE MONTH: ANNEGRET KRAMP-KARRENBAUER
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| ©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.
--o--
ARMENIA
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| 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.
--o--
RUSSIA-JAPAN
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.
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| 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.
--o--
A NEW PRISON FOR RUSSIA
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| 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.
--o--
BRIEFLY NOTED
AZERBAIJAN
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.
MOLDOVA
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.
ESTONIA
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.
--o--
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.
