BRETON/GEROL NEWSLETTER

Saturday, June 29, 2019

Issue 32

THE BRETON/GEROL NEWSLETTER

OSAKA OVERVIEW

The annual summit of the Group of 20 nations has ended in Osaka. Collectively, the grouping represents more than 80 percent of the world's economic output and two-thirds of its people. Its primary aim is to promote international financial stability. The ongoing trade war between China and the United States, the world's two biggest economies, topped the agenda. There was in fact more attention paid to bilateral meetings on the margins of the meeting than to the multilateral discussions on issues such as climate change, where, as expected, the US was the single country not joining the consensus.

Presidents Putin and Trump, Osaka, June 28th
©President of Russia Website

There was a long-awaited meeting between Putin and Trump with vague promises to improve relations and start negotiating various nuclear agreements (current and those about to expire in near future.) It looks like the never-ending saga of Russian attempts to influence US elections in 2016 may be coming to an end.

PM May and President Putin, Osaka, June 28th
©President of Russia Website

The meeting between British PM Theresa May and Vladimir Putin was remarkable not only for its initial coolness. Reports suggest that after the unpleasant discussion over the Salisbury poisoning incidents, the leaders turned to a discussion over ways of promoting trade between their two countries, thus signaling that even the UK is willing to engage in a political dialogue with Russia in order to advance its own interests.

There was a very brief meeting between Canadian PM and President Xi. They were seen chatting for about 10 minutes with only translators present. Both sides, later, were tight lipped about the content but it is not hard to imagine what was discussed. The outgoing Chinese ambassador in Ottawa said that the crisis in the relations is temporary.

On the last day of the summit Trump and Xi made a statement that that US would not impose additional tariffs on China and that trade negotiations would begin soon. According to most experts this not the end of the war but a cease-fire only.

The US also had announced it would not punish (economically) its NATO ally Turkey for purchasing Russian S400 missile system. The delivery of that system to Turkey is described as imminent.

--o--

WHO IS AFRAID OF DONALD TRUMP?

The words may be different, but the pattern is the same. Donald Trump’s modus operandi is consistent. North Korea was warned of “fire and fury”. Venezuela was put on notice more than once that “all options are on the table”, the implication here being that a US military intervention was possible. In the case of Iran, Trump threatened the country with “obliteration” and stated that an eventual US military intervention would be “very short”. In comparing the situation with the US intervention in Iraq, he even added that there was no need for an exit solution.

Presidents Kim and Trum, Panmunjom, June 30th
©KCNA

Conflict with North Korea is now out of the question. Kim is still a good buddy and just sent Donald Trump a “beautiful” letter. Trump even invited him to come down to the border area between the two Koreas, to shake hands. After several months of stalemate, nothing has happened in Venezuela. US allies have pronounced themselves against military intervention, understandably so since there national security interest at stake. In the case of Iran, it is not clear yet whether National Security Adviser John Bolton will manage to convince his boss that bombing the Islamic Republic is the right thing. The most anti-Iran US allies, Israel and Saudi Arabia, probably have their own misgivings about a military intervention that could lead to a Hezbollah-led retaliation against Israel and, for Saudi Arabia, a blockage of vital oil shipping lanes in the Strait of Hormuz. After his discussions with other G20 leaders in Osaka, Trump suggested there was still plenty of time to address the Iran issue.

Whenever he speaks this US President gets a lot of attention and his threats are still unnerving not because of his credibility but because of his position. The fact that his bark is stronger than his bite may eventually catch up with him.

--o--

SPIEF 2019

With Chinese President Xi Jinping (whose best friend is now President Putin) as a guest of honour one could expect that the June 2019 St. Petersburg International Economic Forum (SPIEF) would be a trade and investment promotion exercise not despite sanctions but because of them and of other trade barriers. With Russia still under politically driven sanctions and China facing increased tariffs on exports to the US, the political message coming out of St. Petersburg could be expected to contradict US pronouncements. It is therefore not surprising that President Putin commented about the end of US economic hegemony and went as far as to call the measures taken against Chinese company Huawei as a move against China’s emergence as a high-technology supplier.

SPIEF Plenary Session Speakers, St.Petersburg, June 7th

Russia and China appearing to side against the US in their political statements does not however automatically change international trade flows. The fact that there are difficulties between the US one side and Russia and China and the other does not mean that Russia’s “pivot to the East” can lead to China replacing the US as a trade partner for Russia. Those who were seeing such a change as the major objective in Russia-China relations will qualify the situation as a failure. For the leaders of Russia and China It would seem that expectations were more modest. They congratulated one another on the increase of bilateral trade. Putin highlighted the fact that the trade is not purely commodity-based and has a growing high-technology element. A major deal was in fact signed between Huawei and Russia's largest telecoms operator to develop a fifth-generation network in Russia within the next year. Even more important, especially to Putin was the strong political partnership and the fact that Russia can rely on China as a reliable and predictable partner.

In the discussion about sanctions against Russia, predictability was singled by a Russian industry leader as the most serious issue. The point he made is that it is not the sanctions themselves that cause economic damage, but the fact that a sanction-ridden business environment increases uncertainty which in turn slows down investment.

The impact of sanctions on investment does not however seem to extend to trade. Even with the sanction regime currently in place, EU Russia trade has grown by US100 billion since its 2016 low point. To put things in perspective, that fluctuation almost corresponds to the total Russia-China official trade.

The discussion about sanctions also revealed a rather mixed view among Europeans about whether to extend them almost automatically every six months. Whereas many smaller European countries stated their opposition to sanctions, they had to acknowledge that they did not have the political leverage to turn around the EU decision on the matter. Peter Pellegrini, the Prime Minister of Slovakia even publicly expressed his displeasure that some of the countries proposing or supporting sanctions were among the most active participants at the 2019 SPIEF.

PM Pellegrini’s veiled reference could have applied to some large European countries, but certainly did to the US. In contrast with the political discourse in Washington, one the American participants in the US-Russia Trade panel discussion bragged about the fact that the US private sector delegation was the largest of its kind at this year’s SPIEF. The Chinese delegation was the largest overall, but was heavily loaded with state officials and highly-annoying selfie-addicted journalists.

China’s One Belt One Road initiative was appropriately defended by the Chinese President. His task was made easier by the fact that many of the participants do not share the apprehensions that are regularly voiced in Western media about this allegedly hegemonic Chinese project. To countries geographically closer to China, the building of new infrastructure is not seen as a threat but as an opportunity.

The St. Petersburg discussions also produced unusually positive noises about the Eurasian Economic Union (EAEU), highlighting its positive impact on the rapid growth of internal trade within the Union as well as on the overall foreign trade of Union members. Nikol Pashinyan, the Prime Minister of Armenia, had the opportunity to engage in the defence of the compatibility between Armenia’ membership in the EAEU and its close relationship with the EU. He stressed that Armenia’s economic integration within the EAEU certainly did not prevent it from developing a partnership with the EU in other matters, including economic and political reforms.

PM Pashinyan also insisted, as he has done repeatedly, that Armenia’s greatest problem is its antiquated and corrupt judicial system. This provided an interesting backdrop for President Putin’s handling of the questions on the Michael Calvey case (American businessman Calvey is under house arrest for alleged economic crimes in the context of a dispute with one of his Russian business partners who seems to have used his security service contacts to initiate criminal proceedings). Putin was left to argue that the matter would have to be handled by the Russian judicial system. The only change he offered to contemplate was a more humanitarian treatment of individuals accused of economic crimes.

The Calvey case, although it received a lot of media attention, did not seem to dampen the interest of investors, certainly not that of US corporations. Most often presenting themselves as “global” rather than only US entities, these corporations reiterated their interest in the Russian economy, despite the indirect but real impact of sanctions on the investment climate. Russia-US trade is also on the rise, though not at the same pace as EU-Russia trade.

The word diversification may not have been pronounced often in St. Petersburg, but the reality is that SPIEF has in fact become a vehicle for the promotion of Russian trade diversification, reaching out to virtually every country in the world. That also includes Canada. Political differences notwithstanding, Canada is certainly a welcome guest. The volume of Canada-Russia trade remains relatively small and is subject to commodity-driven fluctuations, but there is an interest in long-term cooperation with Canada in the specialized areas where Canada is among world leaders, including mining, transportation and agricultural technology.

The June 2019 produced a lively and animated political and economic discussion. Difficult issues, such as corruption, were not shunned away. Former Finance Minister Kudrin even singled out corruption as the major obstacle to increased foreign investment and more rapid growth. This may not be enough to lift the Russian economy from its current low growth prospects, but the public acknowledgment of the problem did not deter from an overall impression of moderate optimism.

--o--

UKRAINE ON THE VERGE OF REFORMS

In Ukraine major reforms can be initiated only after the new parliament (Rada) will be elected on July 21st-2019. It has become clear that traditional parties that previously held power most likely would not be represented in the new parliament. That is why the decision by newly elected president Volodimir Zelensky to dissolve the Rada has caused an unprecedented revolt among parliamentarians and their appeal to the constitutional court. The court however ruled in favor of the president. According to recent polls the new party created by Zelensky, "Sluga Naroda" (People's servant) will take over at least 40% of the seats followed by pro-Russian party "Za zhitia"(For life) led by Yuri Boiko and Vadim Rabinovitch.

President Zelensky with European Commission President Juncker, Brussels, June 4th
© President of Ukraine Website

The radical wing of the Ukrainian political specter most likely will not cross the necessary threshold to join parliament. The elections will allow Zelensky to appoint a new Prime Minister-the most important position in the Ukrainian political system. Government management of the economy is run entirely by the PM and his cabinet while the President has the right to appoint the ministers of foreign affairs and defense as well as the attorney general and the head of the national security service.

For the first time since Ukraine became independent (1991) both, PM and President could belong to one party and jointly implement reforms.

For the Canadian politicum it would be of interest to know that some in the president Zelensky's inner circle suggested Chrystia Freeland, current Canadian foreign minister, could become the head of the Ukrainian government. President Zelensky will be in Canada from July 1st to 3rd.

--o--

JERUSALEM TRIO

For the first time in modern political history three senior national security officials from Russia, Israel and the United States met in Jerusalem to discuss a broad spectrum of political issues in the Middle East, including the Syrian conflict, Iran and several other issues all sides wished to keep secret.

Nikolay Patrushev, Secretary of the Security Council of Russian Federation agreed with both of his counterparts that Russia should continue to secure the buffer zone between the Syrian government forces and Israel. Meanwhile it has become known that all participants will try to keep Iranian forces and their proxies like Hezbollah outside an 80-kilometer zone along the Israel-Syria border. As a gesture to the Russian president Putin, Prime Minister Netanyahu in his statement to Patrushev commemorated the tragic date of June 22nd 1941 that marked the beginning of the Nazi invasion of the Soviet Union as well as the immense contribution of the USSR in defeating the invader and winning the war.

--o--

CHINA USES CANADIAN PORK FOR POLITICAL PRESSURE ON OTTAWA

It is no great novelty: alleged violation of food product safety for political gain. This time Canadian pork fell victim to that Chinese strategy. It was announced in Beijing that Canadian pork will be subjected to additional scrutiny:-all containers from Canada will opened and inspected. Practically this means the end of Canadian pork exports to China. It is certainly a heavy blow to the Canadian pork industry. After losing the Russian market five years ago, Canadian pork exporters concentrated their efforts on China that together with the US became the largest market for Canadian pork.

Experts are unanimous in the opinion that the Chinese cancellation of canola oil purchase (worth 5 billion per year) and now pork is related to the fact that Canada has arrested Ms. Meng, the Huawei chief financial officer and the daughter of the corporation's owner. Ms. Meng was arrested at Vancouver International Airport last December on a stop over from Hong Kong to Buenos Aires.

According to an indictment unsealed in January, Meng and Huawei face 13 criminal counts of conspiracy, fraud and obstruction in the U.S. The charges relate to an alleged scheme to circumvent sanctions against Iran through a shadow company in Tehran that prosecutors say was actually controlled by Huawei. She is now under house arrest in Vancouver, fighting her extradition to the US.

President Trump was reportedly asked by PM Justin Trudeau to raise the issue in Osaka at the G-20 with president Xi Jinping. It has become known that the Chinese leader already refused to meet the Canadian PM face to face in Osaka.

--o--

PERSON OF THE MONTH: NEWLY ELECTED MAYOR OF ISTANBUL - EKREM IMAMOGLU

Ekrem Imamoglu

Ekrem Imamoglu, the previously little-known 49-year-old mayor of the Istanbul district of Beylikduzu, has seized on the hope his supporters so desired. He came with a relentlessly positive message as he, for the second time, fought to become the mayor of Istanbul.

The previous election in March was tight. Imamoglu faced former Prime Minister and ruling AK Party heavyweight Binali Yildirim who benefited from all the resources of the state, including its near-total power over Turkish media.

Still Mr. Imamoglu prevailed, though the result was very close. Just 13,000 votes separated the two candidates in a city of more than 15 million.

The government cried foul, alleging votes were stolen and that some polling station officials were not authorized to carry out their functions. It did not contest votes for district mayors which were won by the AKP, even though they were held on the same day and overseen by the same officials.

The nationalist government tried to taint Imamoglu by coming up with various conspiratorial allegations: Greek, terrorist, coup-supporter, American plant, backer of Egyptian autocrat President Sisi, but none of this worked. To the contrary, many residents of Istanbul who usually support President Erdogan voted for the new mayor.

"Whoever wins Istanbul, wins Turkey," said Mr. Erdogan at rallies in the city he once ran as mayor and which propelled him to national power.

This time around, as the Istanbul election clearly has shown, we may see a beginning of major political changes in Turkey as the country begins to look for a new generation of political leaders with a more positive, more secular and inclusive message, different from Mr. Erdogan's brand of confrontational, nationalistic and Islamic ideology.

--o--

KAZAKHSTAN

Dozens of people have been injured and tens of thousands were evacuated following a series of massive blasts at an ammunition warehouse in Kazakhstan's southern town of Arys. Defense Ministry's press service said that a fire that erupted in the warehouse early in the morning on June 24 causing a massive explosion. The cause of the fire was not clear.

The region's governor, Omirzaq Shokeev, announced a state of emergency in the region and ordered the immediate evacuation of Arys' 45,000 residents. According to the authorities around 25 people were being treated at a hospital in the regional capital, Shymkent.

--o--

GEORGIA

Georgia’s ruling party has announced electoral changes in line with demands of protesters who have taken to the streets of the capital Tbilisi in late June. The parliamentary elections in Georgia in 2020 should be held under a proportional system, the head of the ruling Georgian Dream party, Bidzina Ivanishvili, said on June 24th. Ivanishvili said that no threshold for parties should be applied during the elections.

Changing the electoral system from a mixed to a proportional system from 2020 was one of the demands of thousands of demonstrators who have rallied in the Georgian capital since June 20th.Protest leaders have said that the rallies would continue until their wider demands were met.

Demonstrators initially gathered on June 20 to express their anger at Russian State Duma Deputy Sergei Gavrilov, who had sat in the Georgian parliamentary speaker's seat while addressing a council of lawmakers from predominantly Orthodox Christian countries -- the Inter parliamentary Assembly on Orthodoxy (IAO).

The symbolism of a Russian lawmaker speaking in Russian from the parliamentary speaker's chair touched nerves in Tbilisi, sparking the ire of the public, opposition parties, Georgia's president, and members of the ruling Georgian Dream coalition.

While the protests were sparked by concerns about how Georgia handles relations with Russia, opposition parties have sought to seize the moment to press much wider and unrelated demands over economic and political woes that are plaguing the country.

--o--

COUNCIL OF EUROPE

On June 25^th the Parliamentary Assembly of the Council of Europe (PACE) agreed to re-instate the Russian delegation, one PACE’s leading members declaring that it remained “committed to dialogue as a means of reaching lasting solutions”.

Russia had been sanctioned by PACE five years ago, losing its voice in the Assembly after its illegal invasion and occupation of Ukrainian Crimea.

The Russian delegation was back, and Ukraine was out, their delegates returning to Kyiv in protest at Kremlin representatives being unconditionally reinstated to the Assembly. In solidarity with Ukraine, six more nations walked out in protest: Georgia, Poland, Slovakia, Lithuania, Latvia and Estonia.

The matter is taken very seriously in Kyiv where some see the PACE decision as the beginning of a new deal between Europe and Russia over Ukraine, but without Ukrainian involvement.

--o--

RUSSIA

Four suspects are to face murder charges for the shooting down of Malaysia Airlines flight 17 in July 2014, after online investigators published on June 19^th a new report detailing the attack on the passenger airliner which killed 298 people.

Three of the suspects are members of the Russian armed forces who are alleged to have helped a separatist movement in Ukraine to obtain, use and remove a sophisticated anti-aircraft missile system. All four are likely to be tried in absentia when the case is scheduled to be heard in March 2020 in the Netherlands, where most of the victims came from.

--o--

AZERBAIJAN

Azerbaijan's flag carrier, AZAL, says it plans to postpone a $1 billion contract with Boeing to purchase 10 737 MAX jets following the fatal crashes involving the aircraft in Ethiopia and Indonesia.

A spokesman for AZAL told the media earlier on June 3 that the company had decided to cancel the contract due to "safety reasons.» Countries around the globe have grounded Boeing's top-selling 737 MAX jets or banned them from flying over their airspace since an Ethiopian Airlines jet of that make crashed after takeoff from Addis Ababa on March 3, killing all 157 people on board.

--o--

TURKMENISTAN

Turkmenistan’s authoritarian President Gurbanguly Berdymukhammedov has appointed his son as governor of the south-central region of Ahal. News of the appointment came on June 17 amid speculation that Serdar Berdymukhammedov, 37, was being groomed to succeed his father at the helm of the tightly controlled Central Asian nation.

President Berdymukhammedov, 61, has ruled Turkmenistan since his autocratic predecessor, Saparmurat Niyazov, died in December 2006. Government critics and human rights groups say he has suppressed dissent and made few changes in the restrictive country since he came to power.

--o--

VIETNAM

Vietnam has formed a special team of experts - including four Russian scientists - to help preserve the embalmed body of the Communist-ruled state's founding leader, Ho Chi Minh. The special council has been created to assess the condition of Ho's corpse, which was first embalmed nearly 50 years ago and work is due to start next month.

Several countries have benefited from the expertise of the Soviet Union's "Lenin Lab", which put the embalmed body of former leader Vladimir Lenin on display in Moscow shortly after his death in 1924.

China, North Korea and Vietnam have all embalmed their founding leaders with assistance from the Soviet Union.The bodies require regular and expensive upkeep and occasional re-embalming to maintain their condition.

The late Vietnamese leader, affectionately known as "Uncle Ho" in Vietnam, is preserved in a large Soviet-built mausoleum in the capital, Hanoi, where he is displayed in a glass coffin in the dark interior. The site attracts thousands of visitors each year.

--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.

Friday, May 31, 2019

Issue 31

THE BRETON/GEROL NEWSLETTER

EUROPE'S NEW FACE:-REFLECTION OF A GLOBAL TREND

Viktor Orban

Elections in the European parliament in May brought expected yet impressive results. Almost 170 of the elected members (25% of the highest European political body) will belong to the so-called "Euro-skeptics", predominately right wingers, populists and various nationalists. The more stunning success belongs to Nigel Farage and his party which summarizes all of his agenda in one word: Brexit. He got 30 seats in the Euro parliament, more than the traditional pillars of the British politicum, Labour and the Conservatives.

Matteo Salvini

It is widely agreed that two political leaders have become the founding fathers of the growing movement of Euro skeptics: Viktor Orban, Prime Minister of Hungary and Matteo Salvini, Vice Premier of Italy. They were the most active in resisting the so-called progressive ideology of the EU with its unlimited immigration, mandatory immigrant and refugee quotas imposed by Brussels on each member state. Coincidentally or not, both Salvini, Orban, Austrian Chancellor Kurtz and some others who belong to this 25% of the new make up in the EU Parliament also would like to put an end to anti-Russian sanctions imposed on Moscow since 2014. Rather the reflection of any special affinity, this seems more a case of rejecting failing traditional policies.

From Australia to Europe and on to the US and maybe even to Canada (the October 2019 election will tell if this is so) this trend is taking over. Not exclusively but in many ways we are witnessing popular rejection and fatigue with Justin Trudeau-like yoga mat policies and overly politicized dogmas.

--o--

PRESIDENT ZELENSKY

President Zelensky at the front line positions of the Armed Forces of Ukraine in Luhansk region, May 27th
©President of Ukraine Website

Volodimir Zelensky’s inaugural speech as President of Ukraine contained a rather punchy line about his willingness to sacrifice his popular rating in order to do the right thing. The short clip that was shown on some television channels did not always establish clearly that it was in connection with the conflict with the rebels in Eastern Ukraine that he was making the statement. Zelensky has made it one of his priorities to put an end to the armed conflict in that region, thus shifting the emphasis from the conduct of what Poroshenko called at some point an Anti-Terrorist Operation to a conflict resolution process. Zelensky also went further by arguing that it is not so much the rebel-occupied territory that Kyiv must regain but also the minds of the people living in that territory. How Zelensky proposes to go about this peace-making and reconciliation is not yet clear. Politically, there can no real or perceived concession in favour of Moscow and Vladimir Putin. Some form of accommodation with the rebel regions had also been considered as a non-starter under the Poroshenko presidency and perhaps even more with the Parliament that was just dissolved by Zelensky. Although the main motives invoked to call early elections were the parliamentarians’ focus on self-enrichment and the population’s loss of confidence towards them, having a parliament that is more in line with the new president on the key issue of how to deal with the Donbass problem is of vital importance. At this stage, Zelensky does not necessarily need a parliament that fully shares his views on this issue, but at least one that is not on the record as rejecting virtually any kind of arrangement with the rebel regions.

President Zelensky with the Foreign Minister of Germany Heiko Maas
and the Foreign Minister of France Jean-Yves Le Drian, May 30th, Kyiv
©President of Ukraine Website

Although Zelensky has been described as a political novice, this should not be taken to mean that he cannot play a good political game. His quick decision to reinstate Mikheil Saakashvili’s Ukrainian citizenship is not only the fulfillment of an electoral promise. It is also a rather clever way of broadening the support he would enjoy in the new parliament. Saakshvili is already back in Ukraine. He will most likely take an active part in the upcoming parliamentary election campaign and use the opportunity to exact some form of revenge against former President Poroshenko who ran him out of the country. The prospects for Poroshenko’s party were not too bright already. With Saakashvili going after him, they are not getting any better. Saakashvili is also useful to Zelensky in that as the perceived arch-enemy of Vladimir Putin, his return to Ukraine strengthens Zelensky’s credentials as standing in opposition to Putin.

In the first weeks of his presidency, Zelensky is moving quickly to deliver on his electoral platform including the anti-corruption measures, as well as to establish himself as a credible interlocutor. To use the theater analogy, he is creating the décor and doing a well thought-out initial mise en scène. He has already made some significant personnel changes, but does not have the legal authority to remove key players such as the Minister of Foreign Affairs, the Minister of Defence or the Head of the Security Service. He has to ask Parliament to do that. Until he has a Parliament that supports his policies and allows him to select his cast, his effectiveness remains limited.

--o--

EURASIAN ECONOMIC UNION IS ALIVE AND KICKING

The fifth anniversary of the Eurasian Economic Union was marked by a summit of its members in the Kazakhstan capital of Nur-sultan (recently renamed to honour Nursultan Nazarbayev, long time president and also only one of three surviving members of the last Soviet politburo. The other two are Mikhail Gorbachev and Yegor Ligatchev).

The presidents of Russia, Kazakhstan, Armenia, Belarus and Kyrgyzstan and the First President of Kazakhstan
May 29th, Nur-sultan, Kazakhstan
©President of Russia Website

The presidents of Russia, Kazakhstan, Armenia, Belarus and Kyrgyzstan gathered to discuss the next phase of their countries' integration and further economic development. The Union will probably joined by Tajikistan, Uzbekistan and some associated members as Mongolia and Vietnam. In general the economic growth of the Eurasian Economic Union was at 2.8% annually which is almost in sync with the global growth.

The Eurasian Economic Union is studiously avoiding getting engaged in a political integration process. Its economic integration initiatives, although not as spectacular, are nevertheless also used as vehicle for modernisation of economic and trade practices, such as for instance customs clearance practices. In this respect, their impact is real and long-lasting.

Former president of Kazakhstan Nursultan Nazarbayev who was bestowed upon the title of "Yelbasy" (father of the nation) by grateful subjects was made also an honorary chairman of the Eurasian Economic Union.

--o--

PERSON OF THE MONTH: THERESA MAY

PM Theresa May announcing her retirement, May 24th
©UK PM Website

Theresa May will be the Prime Minister of the United Kingdom until June 7^th when she will step down. May has been in office since July 2016. The country’s second female Prime Minister after fellow Conservative Leader Margaret Thatcher, May is a highly experienced politician who took over as Prime Minister from David Cameron during a period of political uncertainty following Britain’s referendum approving withdrawal from the European Union. The daughter of a Church of England clergyman, May was ambitious from the very beginning. She went to a local grammar school before going to Oxford University to study geography at St Hugh's College. She embarked on a banking career and a few years hence she joined the Association for Payment Clearing Services. She entered the political arena in the 1980s and served as a councillor for the London Borough of Merton for around eight years. With her political aspirations on the rise, she made attempts to be elected to the House of Commons in 1992 and 1994, albeit unsuccessfully. After her successful election as the MP for Maidenhead in the 1997 general election, her career has been on the upswing. As a politician she favours strict migration laws and is a supporter of same sex marriages.

May's political career was eventually destroyed by all the mess around Brexit as she struggled to find a compromise in the current political climate which is evidently is not very conducive to compromise. This seems to be the sign of our times on both sides of the Atlantic. With our own reputation for stubbornness and secrecy , she struggled not only against stubborn attitudes of parliamentarians towards everything related to it, but also against the multitude of personal political agendas of competing politicians from the opposition and even her own party. It is doubtful that anyone in her place would have fared better. A much clearer analysis of her effort will be possible some time later when those who criticized May would be given a chance to prove that they have better solutions and remedies and that they possess more elastic set of political skills. One can safely bet that they do not, but until they fail as well, it looks like Theresa May will be the obvious scapegoat.

--o--

TROUBLE IN THE BALKANS (AGAIN)

Serbia's president Aleksandar Vučić declared a state of emergency in the border areas with Kosovo, the independent state carved out of Serbia proper in 2008. The formal pretext for the state of emergency was Kosovo's security forces raid not only into part of Kosovo populated by Serbs but, according to Belgrade, also into Serbia territory as well. Kosovo denied entering Serbia, but said its raid was necessitated by the search for criminals on the run.

There are deeper underlying reasons for the escalation of tensions. President Vučić faces a dilemma: he wants to bring Serbia into the EU in order to speed up its economic development and at the same time for the sake of internal politics he has to exhibit some show of strength towards Albanians in Kosovo. That is why during his militant speech to the nation he hinted that Serbia will be ready to recognize Kosovo independence in exchange for a safe and peaceful border.

--o--

RUSSIA IN THE ARCTIC

Russia has launched a new nuclear-powered icebreaker as it looks to strengthen its position in the Arctic Ocean to capitalize on the region's growing commercial potential. At a launch ceremony in St. Petersburg on May 25, officials toasted the Ural, the third vessel in a plan to reinforce its fleet with some of the largest and most powerful icebreakers ever built.

“They are the ships from new generation icebreakers of that class that we pin our hopes on in exploration of the Northern Sea Route. It is a principally new ship," Russian Deputy Prime Minister Yuri Borisov said at the ceremony.

Ural nuclear ice-breaker
©Rosatomflot

Thawing ice in the Arctic is beginning to give increased access to much of the planet's remaining undiscovered reserves of oil and natural gas and large deposits of zinc, iron, and rare-earth metals, prompting nearby states as well as world powers such as China to rush and claim territory or boost their presence in the region.

Moscow's is locked in a race with rivals Canada, the United States, Norway and China to dominate the Arctic through a corridor running from Murmansk to the Bering Strait near Alaska, a faster route for sea cargo traveling from Asia to Europe.

The two other icebreakers in Russia's Project 22220 series are the Arktika (Arctic) and Sibir (Siberia). Russian President Vladimir Putin has said that Russia's Arctic icebreaker fleet could total 13 or more by 2035.

--o--

LITHUANIA

On May 26^th Lithuanians elected a new president in a runoff vote between two center-right candidates.

The election, which was held alongside the vote for the European Parliament, was won by banker-turned-politician Gitanas Nauseda who defeated Ingrida Simonyte, a lawmaker and former finance minister.

Gitanas Nauseda

Nauseda will succeed Dalia Grybauskaite, who has served the maximum two 5-year terms as Lithuania's head of state since 2009, a Baltic country bordering Russia that is a member of the European Union and NATO.

The election campaign has been dominated by voters' anger over economic inequality and corruption. Nauseda has pledged to maintain a strict tone toward Russia, saying he would not travel to Moscow to meet with Russian President Vladimir Putin until Russia ends its aggression against Ukraine. He may, however, not be such a vocal critic of Russia as Grybauskaite.

Vilnius faces tense relations with Moscow. The Baltic country has arrested and charged several people in recent months accused of spying for Russia.

--o--

KAZAKHSTAN

Tyson Foods, the largest U.S. meat producer, says it is planning expansion into Kazakhstan as it seeks growth overseas.

"We've visited Kazakhstan and have interest in the nation's future food-production efforts. However, we have not formalized plans for a project there," company spokeswoman Liz Croston said in a statement on May 23.

The Arkansas-based company produces beef, pork, chicken, and processed foods, including goods for export. Its poultry subsidiary, Cobb-Vantress, has a presence in Russia."One of our growth strategies is to expand our global business, so it's not unusual for us to consider various international opportunities," she said in a statement e-mailed to RFE/RL.

The Financial Times reported on May 23 that Tyson was negotiating a multibillion-dollar investment in beef production in Kazakhstan for potential export to China. The two countries share a nearly 1,800-kilometer border.

Kazakhstan is one of the world's largest wheat producers, and has millions of hectares of arable lands suitable for livestock grazing. However for years the country's agriculture sector lacked major investments.

In July 2018, Beijing imposed an additional 25 percent tariff on U.S. beef imports in retaliation for U.S. levies on Chinese goods. As a result, U.S. beef exports to China "have dropped off precipitously," the U.S. Department of Agriculture said in an August 2018 report.

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TURKMENISTAN

Russia's state-owned energy giant Gazprom says it has resumed imports of natural gas from Turkmenistan that it stopped three years ago. Turkmengaz confirmed the move. No details were given about the amount of gas that Russia would buy or at what price.

Russia was once the leading importer of Turkmen gas until it was displaced by China in 2010.

Relatively cheap imports of gas from Turkmenistan and other Central Asian countries enabled Russia to boost its exports to Europe.

In 2015, Gazprom announced its intention to cut imports of Turkmen gas to 4 billion cubic meters per year, down from the 10 billion level that it had been importing since 2010.

The move was followed by a complete halt in 2016, putting significant pressure on Turkmenistan's economy, which is highly dependent on hydrocarbons as a source of hard currency. Russia's purchase halt came after the collapse of hydrocarbon prices in 2014.

The move also came as relations between Moscow and the former Soviet republic became increasingly strained by a competition to supply the large Chinese gas market.

Turkmenistan owns the world's fourth-largest known reserves of natural gas, but has limited infrastructure to export its energy resources.

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ARMENIA

Armenian Prime Minister Nikol Pashinian has called for a radical reform of the country's judiciary, contending that many courts have lost their legitimacy and too many judges are beholden to the country's former authorities.

Pashinian said in a speech at a conference attended by Armenia's military, judicial, and political leaders on May 20th that while the country had formed legitimate executive and legislative branches of power in the last year, the judicial system remained under the influence of the former "corrupt government." He described his plan for judicial reform as the "second phase" of the bloodless revolution that swept him to power a year ago. Pashinian said that all judges whose rulings were found unlawful by the European Court of Human Rights must be dismissed and that he was willing to consider constitutional amendments to bring about the necessary reforms.

Pashinian, who came to power after leading a wave of nationwide protests last spring against longtime leader Serzh Sarkisian, said that all judges must now be subjected to a “vetting process” that will reveal whether they can serve as impartial arbiters.

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LATVIA

Egils Levits

Egils Levits descendant of Holocaust victims was elected as president of Latvian Republic. It has to be noted that Latvia has a sad distinction of having second largest per capita number of Jews murdered during the WW II (out of 116.00 Jews in Latvia in 1939 only 18.000 survived). Latvian society lived for a long time in the shadow of this horrific history and often failed to come to terms with it. Election of Levits in many ways is an important symbolic step towards forgiveness and reconciliation.

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THE AUTHORS

Tuesday, May 7, 2019

Issue 30

THE BRETON/GEROL NEWSLETTER

UKRAINE: NEW PRESIDENT, OLD CHALLENGES

Volodimir Zelensky won an overwhelming victory in the April 21^st second round of the Presidential election in Ukraine, receiving 73% of the vote. Outgoing President Petro Poroshenko only received 24%. It is far easier to assert a meaning to Poroshenko’s defeat than to Zelensky’s victory. Poroshenko had lost credibility especially on the central issue of the fight against corruption. He only managed to do well in Western Ukraine where his nationalist policies and pronouncements found greater resonance. To a certain extent, Poroshenko’s defeat is also a loss for the Ukrainian political class that has been in control of Ukrainian political life since the ousting of former President Yanukovich. As for Zelensky, there is a perception that, although he has offered general support for the European integration ideas that have been promoted by his predecessor for the past five years, he does not espouse them with the same fervour and that as a Russian-speaker he may take a different view of the future relationship with Russia. It is then not surprising that he avoided clearly defining his future policies during the electoral campaign in order not to expose himself to the direct criticism of the ruling political class, something that could have eroded his popular support.

Zelensky was mainly elected as the non-traditional politician who will address the problem of corruption, but also, to a certain extent, as a leader who would take a different approach than his predecessor when it comes to relations with Russia. He has used the vague enough formula that Ukraine will neither be “the corrupt partner of the West nor the little sister of Russia”. On the key issue of relations with Russia, his margin of manoeuvre will indeed be limited.

More specifically, on the issue of relations with Vladimir Putin, Zelensky’s election night message to the people of the other countries of the former Soviet Union that “everything is possible” was an interesting attempt at positioning himself as one who would be opposed to Putin should he happen to live in Russia and as conveying the message that he is no friend of the Russian President.

As for how he proposes to address the problem of the rebel regions of Eastern Ukraine, there is also a perception that he may be less dogmatic than his predecessor and slightly more accommodating. While there is not much appetite in Ukraine altogether for any concession to the rebel regions, there is also a sense that Zelensky has the mandate put an end to the fighting.

Zelensky has also made clear that he wants to move quickly on his anti-corruption agenda. On this issue as well as for the rest of his agenda, the issue of dissolving the Rada and having early parliamentary elections becomes crucial. Without his own parliamentary faction, his capacity to initiate significant change on any issue will be rather limited.

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PERSON OF THE MONTH: VOLODYMIR ZELENSKY

Zelensky was born in 1978 to Jewish parents in Krivyi Rih, a predominantly Russian-speaking industrial city in southern Ukraine. He left to pursue a career in show business. His first successes were in the Ukrainian version of KVN. KVN, literally the "Club of the Funny and Inventive People", is a very popular humour show that started during Soviet times and remains popular throughout the region. Their participation in KVN led Zelensky and two friends from his hometown to create the film studio Kvartal 95 in the Ukrainian capital.

Kvartal 95 created the television series Servant of the People, in which Zelensky played the role of President of Ukraine. The series aired from 2015 to 2019. A political party of the same name was created in March 2018 by employees of Kvartal 95. The studio became enormously successful throughout the post-Soviet world, and several of Zelensky’s Kvartal 95 colleagues also played key roles in his campaign team.

The comedian become Ukraine’s first Jewish president, making his country the only one outside of Israel to have both a Jewish president and prime minister. Volodymyr Groysman took the latter post in April 2016.

Inviting comparisons with Italy's Five-Star movement, his campaign has relied heavily on social media and comedy gigs of jokes, sketches and song-and-dance routines that poked fun at his political rivals.

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RUSSIA-UKRAINE

Russian President Vladimir Putin has signed a decree simplifying the procedure for people living in parts of eastern Ukraine held by Russia-backed separatists to obtain Russian citizenship.

The decree, which was expectedly criticized by Ukraine and most of its western supporters, was published on the Kremlin website on April 24th.

It comes three days after Ukraine elected a new president, opening the door to potential changes in a relationship severely damaged for the past five years by Russia's seizure of Crimea and support for the forces who hold parts of Ukraine's Donetsk and Luhansk regions.

Russian officials presented the action as a humanitarian gesture in favour of the residents of the regions in question. There may be some of that, but the timing is also a way for the Russian side, along with other trade limitation measures, to begin the possible upcoming discussions with President Zelensky from a position of force.

On the other hand, giving Zelensky the occasion to react negatively to a Russian action is a way for him to assert his own credentials back home.

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US ELECTIONS 2020: DOES TRUMP STAND A CHANCE?

After the Mueller report, as presented by Attorney General Barr, cleared Trump of “collusion with Russia” charges he regained self-confidence and confirmed his intentions to run in 2020. He will be a formidable candidate for any democratic nominee. His electorate base though smaller than it was in 2016 will most likely overlook any of his extravagant behavior, his endless war against media, non-stop staff reshuffles and other countless examples of typical Trump-like shenanigans with which we have become all so familiar. There is a popular view that Trump managed to spoil relations with allies in Europe as well as brought relations with Russia to a dangerous low. On the economic side, however, the Obama legacy along with his own policy have so far created substantial economic growth. The red states that voted for Trump in 2016 are enjoying the best economic growth, increase in wages and slightly lower unemployment in years. His firm stand on Chinese efforts to increase its presence in the US economy through artificially low import tariffs, theft of intellectual properties and other illegitimate and semi-legitimate ways is firmly supported by the political establishment and by the business community.

It is too early to tell, but Trump's leading opponent, who just now entered the race and right away became a Democratic front-runner, is Joe Biden, former senator and former vice-president. Biden counts on the assumption that Democratic voters will pick him as the middle of the road candidate and will not gamble on the uncertainties represented by more radical progressive candidates. So far the polls prove him right as Biden is ahead even of Bernie Sanders by several percentage points.

As one British observer noticed, at this point only Joe Biden will be able to prevent the transformation of the Democratic party into something akin to the British Labour party.

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COMRADE KIM TAKES THE TRAIN TO RUSSIA

The same armored train that took his grandfather Kim il sung on the longest train ride in 1974 across the Soviet Union and most eastern European countries now brought Kim Jong un to a summit with Vladimir Putin in Vladivostok.

It was Kim’s first trip to Russia.

Squeezed between the US and China as far as the denuclearization of the Korean peninsula is concerned, Kim looks for some degree of support from the former patron and Big Brother in Moscow. While trade between North Korea and Russia remains minuscule (30 million USD), thousands of North Korean workers labour as tree loggers in Siberia and send millions of dollars back home to support their families and the state itself. The UNSC resolution requires Russia to terminate the contract with Korean workers by 2021 as part of international sanctions' package. Both Kim and Putin discussed that issue and according to Russian media will try to find a solution. Putin also confirmed that he had received a message from Kim for Donald Trump.

Among some interesting projects discussed in Vladivostok was the idea to build a railroad from Russia to South Korea via the North. It could substantially cut the time of transporting goods from Europe to South Korea.

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RUSSIA-SYRIA

Syrian President Bashar al-Assad met with several senior Russian officials for talks in Damascus on April 20. to finalize lease of Syria’s Tartus port to Russia.

Russia's Foreign Ministry said Assad met over two days with Moscow's special envoy to Syria, Aleksandr Lavrentiev; Russian Foreign Minister Sergei Vershinin; Deputy Prime Minister Yury Borisov; and several Defense Ministry officials.

Russian state-run TASS news agency quoted Borisov as saying that a contract on renting the Tartus port by Russia was expected to be signed soon. The lease is for 49 years.

In December 2017, Russia’s Federation Council ratified an agreement between Moscow and Assad’s government on Russian forces' access to the naval base in Tartus.

It allows for the Russian Navy to expand its technical support and logistics base. It also enables visits of Russian ships in Syria’s territorial waters, internal waters, and ports.

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KAZAKHSTAN

Kazakhstan's ruling Nur Otan party has nominated interim President Qasym-Zhomart Toqaev for the presidency, virtually assuring his victory in a snap election scheduled for June 9.

The announcement was made at party congress on April 23, weeks after Nursultan Nazarbaev abruptly resigned as president after 30 years in power in the tightly controlled Central Asian country.

"I propose Toqaev's candidacy for consideration," said Nazarbaev, who remains chairman of Nur Otan as well as the country's Security Council, and holds formal "leader of the nation" status. "I ask everyone to support his candidacy."

The party voted unanimously in favor of his proposal. Nur Otan had said in a statement on its website that a special congress would choose the candidate after the agenda for the meeting of the highest governing body of the party was approved on April 22 by its Political Council.

The 78-year-old Nazarbaev is chairman for life of Kazakhstan's Security Council and has been granted the title of "elbasy," or leader of the nation, which gives him and his family lifelong immunity from any civic or criminal prosecution.

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BELARUS

Belarusian President Alyaksandr Lukashenka has been invited to a dinner hosted by European Council President Donald Tusk to celebrate the 10th anniversary of the Eastern Partnership in Brussels on May 13.

Several EU sources speaking under the condition of anonymity have confirmed that Lukashenka last week was invited alongside the leaders of the EU's other five eastern partners -- Armenia, Azerbaijan, Georgia, Moldova, and Ukraine.

That summit was the first high-level event organized by the European Union in which Lukashenka was allowed to attend after having been excluded from the previous four summits.

Belarus, which has been under Lukashenka's rule for 25 years and has been called the "last dictatorship of Europe," was sanctioned by Brussels in the wake of the crackdown that followed the presidential election in December 2010.

But in February 2016, in response to the release of all political prisoners in August 2015, the EU lifted most sanctions against the country.

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KYRGYZSTAN-TAJIKISTAN

A new incident near a disputed segment of the Kyrgyz-Tajik border has increased tension in the volatile area.

Kyrgyzstan’s State Border Service said on April 23 that a day earlier, a Tajik man in the village of Tojikon forcibly took an eight-year-old Kyrgyz boy from the adjacent Kyrgyz village of Ak-Sai into Tajik territory.

According to Kyrgyz officials, the boy was returned to Kyrgyz authorities in 30 minutes and at least 50 local Kyrgyz men and women demonstrated in Ak-Sai to voice anger over the incident.

Many border areas in Central Asian former Soviet republics have been disputed since the collapse of the Soviet Union in 1991.

The situation is particularly complicated near the numerous exclaves in the volatile Ferghana Valley, where the borders of Tajikistan, Uzbekistan, and Kyrgyzstan meet.

The chief of Tojikon, Gafurjon Juraev, told the media that the incident was the result of a new standoff between ethnic Kyrgyz and ethnic Tajiks living close to the disputed part of the border.

According to Juraev, residents of the Kyrgyz village blocked a road crossing the area and vandalized several Tajik vehicles, while Tajik men broke a window of a car with a Kyrgyz license plate.

--o--

MONGOLIA

Chinese Premier Li Keqiang met with Mongolian President Khaltmaa Battulga Wednesday ahead of the Second Belt and Road Forum for International Cooperation to be held from April 25 to 27 in Beijing.

China is enhancing its strategic partnership and taking the relations between the two countries to a new level, Li said.

Mongolia, as many other smaller countries in need of the Chinese investments, reasserted its support for one-China principle and made assurances to China that Taiwan and Tibet are inseparable parts of China.

Mongolia, as was declared during the meeting, is willing to strengthen the alignment of the Development Road program with the BRI (Belt and Road Initiative), expand cooperation in trade, energy and infrastructure, and advance the development of the Mongolia-China-Russia economic corridor.

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