Issue 15

THE BRETON/GEROL NEWSLETTER

MONTREAL-DAVOS

Global cooperation and integration through international alliances and tariff-reducing agreements only recently looked like the only promising way for international trade development. President Trump came to the White House with the main motto of his presidency being replacing globalism by old-fashioned competition and the system of bilateral agreements. From his point of view, based solely on his subjective business experience rather than on detailed economic expertise, bilateral agreements provide the US economy (still the most powerful in the world) with additional advantages: striking deals that favor the US. In the same vein, Trump and his apparatchiks concluded that the framework of bilateral agreements where the US can more easily dominate is preferable to a complicated structure of multinational agreements like NAFTA, and similar regional trade facilitation treaties. In Davos, Trump expanded his “America First” formula with a more conciliatory “First but not alone”. Observers concluded that Trump's speech had substantially moved him away from all his pre-election radical statements.  The question is for how long.

NAFTA gets to Trump the most, as an example of depriving the US economy of its rightful advantages. In his view, NAFTA unduly favors Mexico and Canada. January talks in Montreal had been described by Trump economic advisers as the last attempt to modify NAFTA and make it more fair for the US. Most likely NAFTA will survive in a modified form, but it is also a possibility that if the modifications are not made as the American side envisions them, the US will nullify the whole agreement.

In Davos President Trump delivered a speech which he himself characterized as "historic". In this speech he attacked not only NAFTA but the entire framework of multilateral approaches to world trade. He gave the example of Great Britain's improved trade relations with the US in the immediate aftermath of Brexit. The team opposing Trump's view of world economy and defenders of globalization included such world leaders as Merkel , Macron and Trudeau.

--o--

UKRAINE AND DONBASS: BETWEEN THE ELUSIVE AND THE INCONCEIVABLE

President Poroshenko and Secretary of State Tillerson, Davos, January 26th
©President of Ukraine Website

The conflict in Ukraine receives relatively little media coverage. Yet it is probably the most significant source of political confrontation between Russia and the US for the foreseeable future.

The Ukrainian Parliament has just adopted a Donbass Reintegration Law that declares Russia the aggressor state and the Donbass region as occupied territories. The Law also gives to the president of Ukraine president  the authority to manage the military activity in the area of the conflict as well as it empowers a special operational unit of the Ministry of Defence to exercise control over the activity of the power ministries in the area. In this last respect, it is not clear whether there will be any change one way or the other to de facto blockade on the Ukrainian side of trade with the occupied regions.

With this new Law, the conflict in the Donbass will no longer be considered an anti-terrorist operation, but a military action in self-defence. President Poroshenko has called the new Law the “technology” that would allow bringing Donbass back into Ukraine. Whereas the Law clarifies a number of points concerning the liability of the occupying forces and the validity of administrative acts performed in the occupied territories one would be hard-pressed to find any provision that would contribute to reintegrate the Donbass into Ukraine.

Despite the assurances of President Poroshenko that the Law gives priority to a political solution it is difficult to see how this is the case. There is, for instance, no mention of the Minsk agreements, the basis on which diplomatic efforts have tried to build for the last few years. Russia has more or less called it the end of Minsk agreements. The EU has been more circumspect, but re-affirmed its attachment to the Minsk agreements.

Poroshenko’s insistence on having this new legislation could be explained by the fact that it caters to the partisans of a hard line against Russia, confirms his reading of the nature of the conflict in Eastern Ukraine and strengthens his authority to manage the conflict.

If the Law does indeed provide a “technology” it is the one that would be needed in case of a military solution to the conflict. Such a solution is, regardless of Western promises of new weapons for Kyiv, elusive. Russia is unlikely to abandon the Donbass. It would most likely match weapons improvement on the other side.

The Law complicates any further eventual negotiation with Russia. It seems that, for a majority of Ukrainians, any negotiated settlement with Russia is virtually inconceivable in that it would entail unacceptable concessions. Having Russia legally labeled as the aggressor only makes any real negotiation even more difficult even to initiate.

By calling the area of conflict “occupied territories” the Law also casts the current authorities in the area as irrelevant. For Kyiv, as for Washington for that matter, these authorities essentially do not matter, as it is their view that Moscow is calling the shots.

By making more difficult a negotiated reintegration, the legislation firms up the rebel regions’ sense that their future lays either in full independence from Ukraine or in integration with Russia. It is not clear though that Russia is ready for the latter.

After the last round of consultations with his US counterpart on January 26th, Vladislav Surkov, Putin’s adviser for relations with Ukraine, made the comment that the latest US proposal on peacekeeping seemed, at first sight, “doable”. While desirable from a humanitarian point of view, a functioning peacekeeping arrangement might freeze the conflict in a way that so delays reintegration of the rebel regions as to make it almost impossible. Such an arrangement might also serve as a pretext for the EU to lift some of its sanctions, decreasing the pressure for a full negotiated settlement.

--o--

RELUCTANT LEFT TURN

Chancellor Merkel, PM May, President Macron
©Facebook

German Chancellor Angela Merkel once again gave proof to the old dictum that the real goal of staying in power is to stay in power. There are very few things that a political leader will not want do for that. After all viable options of building a governing coalition with the Free Democrats or the Greens had failed, Merkel decided to restore the good old coalition with the Social Democrats. This time her concessions to the left will be more profound on social issues and immigration, but allying with the Alternative For Germany (the right wing party that successfully jumped into the Bundestag) would be political suicide for the Chancellor.

Germany, unlike Austria, is a leading European nation and it cannot allow itself to experiment bringing extreme right wingers into the government. Both Social Democrats and Merkel's Christian Democrats were opposed to the coalition, but harsh political realities forced their hand. This move to a certain degree relegated Merkel, for the time being at least, to the second fiddle seat in European politics and catapulted French President Emmanuel Macron into the position of top European leader, with a new party, a new approach and fresh ideas.

--o--

KIM JUNG UN'S OLYMPIC VICTORY

One has to admit that North Korea and its youthful tyrant already earned himself an Olympic Gold medal of sorts even before the games begin. He not only managed to walk away from what seemed to be an imminent military confrontation with the US, but suddenly re-engaged in negotiations with the South and agreed to send his athletes and for some reasons a music band of 140 performers to the Winter Olympic Games in PyeongChang, South Korea. All that was done without any visible compromises on its nuclear or ICBM development programs.

It is rather evident that so far Mr. Kim had outplayed Mr. Trump and outmaneuvered China and Russia. So the gold medal goes to Kim.

It is nevertheless premature to conclude that North Korea will avoid war in the long run, without some form of concessions on its part. It is not impossible to imagine that these Winter Games could be the last for Kim and his regime.

--o--

SANCTIONS AS A MAINSTAY OF US-RUSSIA RELATIONS

Under the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA) Section 241, Congress required Treasury, in consultation with the Department of State and the Director of National Intelligence, to provide a report regarding senior political figures and oligarchs in the Russian Federation.

The report was issued 10 minutes before midnight on January 29^th. It lists 210 Russian officials and business people that could be subjected to sanctions for their business and political activities (going back decades). The business activities are deemed to have enabled them to amass fortunes through criminal or illegal practises. The vast majority of that capital has been transferred or invested, some in the US (in all available investment options) or stashed away in offshore accounts worldwide.

Not everyone on that long list will be hit with sanctions, but those who will risk seeing their assets frozen and subjected to forensic accounting. Many people formerly known as oligarchs are beginning to feel the heat and are faced with very unpleasant options: to transfer in a hurry what can be salvaged back to Russia, a move tantamount to admitting guilt, or take chances in a legal battle with the American justice system as was already stated by Oleg Deripaska, one such Russian tycoon.

President Putin, maybe expecting something even worse, reacted in a moderate tone, suggesting there would be for the time being no counter-measure.

Even if only by way of a threat, revving up sanctions once again against Putin and his base at this time is an obvious attempt to go after Putin before the upcoming elections in March by weakening an already vulnerable Russian economy. It looks like the relations between US and Russia will yet slide further down before they get any better.

--o--

PERSON OF THE MONTH: SEBASTIAN KURZ, CHANCELLOR OF AUSTRIA

Sebastian Kurz, Facebook profile photo

Elected in late 2017, 31-year old Kurz became the youngest government leader in Europe. This is not the first record he set. In 2013 he became the youngest foreign minister in the world. He looked almost like a teenager when in 2014 he met with aging John Kerry and gray haired Iranian Foreign Minister Javad Zarif.

Kurz fits well in a new trend that gives old parties a new makeover and introduces fresh faces to the top political echelons. Some political analysts in Europe have brushed aside dire predictions from the left that Kurz is an extreme right winger and define him as a more conservative version of Justin Trudeau and Emmanuel Macron.

--o--

BRIEFLY NOTED

SYRIA

The Turkish military continued their operation around the city of Afrin against Syrian Kurds. The Turkish army is assisted by Sunni militias. This operation, code named by the Turks 'Olive Branch' started to cause serious tensions between Turkey and the US (despite their status as NATO allies) as well with Iran and Russia, each pursuing its own interests and goals that do not coincide and in some cases are on a collision course.

KAZAKHSTAN

For the first month of 2018, Kazakhstan will chair the UN Security Council. During his January 2018 visit to Washington (during which he had a working lunch with President Trump) President Nursultan Nazarbayev said that in less than 10 years his country will join the club of 30 most developed countries in the world. Today Kazakhstan is implementing a wide array of reforms within every sphere of its economic, financial and social development.

MOLDOVA

The Government of Moldova announced that it will leave the Commonwealth of Independent States (CIS) only after the country is confirmed as a candidate member of the EU. The statement was made in response to some voices in parliament demanding the immediate withdrawal from the CIS.

MONGOLIA

Mongolia on Wednesday approved a plan to build the first oil refinery in its southeastern Dornogovi Province. The construction of the refinery is scheduled to begin in the second quarter this year, the Mongolian government press office said in a press statement Wednesday. The project was financed by a loan from India. The refinery will have a processing capacity of 1.5 million metric tons of oil per year and will annually produce 560,000 tons of gasoline and 670,000 tons of diesel fuel, as well as 107,000 tons of liquefied gas. The refinery would boost Mongolia's gross domestic product by 10 percent.Mongolia currently exports crude oil to China while importing petroleum products from Russia.

CHINA

Bejing announced that it will participate in Arctic development. China will use the Northern Sea Route Arctic seaways as a shortest transit route for transporting freight to Europe and North America. As part of this announcement Chinese offered the assurance that its participation will be in full respect of the local environment and the integrity of the Arctic's ecology.

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.

Issue 14

THE BRETON/GEROL NEWSLETTER

HAPPY NEW YEAR TO OUR LOYAL READERS!

APRÈS MOI, LE DÉLUGE?

President Putin filing his candidacy documents at the Central Election Commission, December 27th
©Website of the President of Russia

There will probably be a lot of agitation around alternate candidates and even non-candidates, but there is, of course, little doubt about Vladimir Putin winning the Presidential election that will be held on March 18, 2018. The question that puzzles observers is: what next? As for Putin himself, it seems rather clear that this will be his last term as President. The most likely option for him afterwards is to assume the role of pater patriae, something of a cross between what Deng Xiaoping did in China and what Lee Kuan Yew did in Singapore. Two elements are at stake: a residual high-level involvement in the political life of the country, outside of politics (Putin, by the way is running as an independent not as the representative of a party), immunity from prosecution (you never know what could happen).

The question as to whether Putin might choose not to complete his six-year term does arise. The option indeed exists. Whereas it would not be like Vladimir Putin to abandon the ship, his “weakness is not an option” mantra may compel him not to want to become a lame-duck in a country where strong personal leadership is crucial.

Beyond Putin himself, the key question is to what kind of political system does Putin want the country transition to, after his departure. The simplest most efficient option would be to install a president that would essentially be a clone, politically speaking. The right person could then be president for up to 12 years. The main requirements for the new President would be loyalty to the Putin tradition and experience in government. In that context former President and Current PM  Dmitry Medvedev, albeit not inspiringly, tops the list.

President Putin, PM Medvedev, Deccember 21st
©Website of the President of Russia

The problems with that option are that electoral success is not guaranteed and that this would further aggrieve the young generation, essentially the people born after the end of the Soviet Union. Experienced pollsters have observed that although Vladimir Putin’s popular support is broad, it is not deep. The manipulation that allowed Putin to return  to the presidency in 2012 was not fatally unpopular, but it led to the lowest ever score for the party of power at the December 2011 parliamentary elections. The high overall rating of Putin does not mean there is strong support for the entirety of his political program, especially among younger people. The authoritarian bent as well as the lackluster economic performance create a long-term vulnerability for Putin’s managed democracy system.

For Putin, there is little if any attraction even to try to replicate the democratic systems of Western Europe and North America. To him Russia would need to develop progressively its own type of democracy that would meet the twin requirement of maintaining stability while opening up the political process, (essentially shifting the emphasis from authoritarian to liberal). He himself used the word “flexible” to describe the political system he sees for Russia. One possibility might be to make Russia more parliamentary than presidential, something President Nazerbayev seems to want to try in Kazakhstan. In a country that traditionally likes strong leaders, that has a long one-party tradition and where political parties do not seem up to the task, the challenge is daunting, the outcome uncertain. Yet, Putin the historian knows that evolution is unavoidable and that history will judge him on how he will address this last challenge.

--o--

WAR AFTER THE OLYMPICS?

The Winter Olympics in South Korea, to be held from February 9^th to 28^th, may be the last reprieve for the North Korean regime before the US decides to go ahead with a limited, but devastating attack on Kim Jong Un’s nuclear sites and possibly decapitating strikes against the regime’s upper echelon. According to military experts, the operation under consideration would definitely include various precision air strikes, including the heaviest, non-nuclear munitions like bunker busting bombs and the use of US Special forces with the expertise required for neutralizing and securing potential nuclear sites inside North Korea. Discussions around this issue have intensified in the last several weeks. There were back and forth visits and discussions among experts from the US, China and Russia. A recent visit to Pyongyang by a Russian Defense Ministry delegation was possibly a last ditch attempt to relay to Kim the seriousness of his situation. In addition US Secretary of State Tillerson just admitted that the United States gave assurances to China that should the above-mentioned military operation take place, the American troops would not remain in North Korea, but transfer day to day management of further developments to the Chinese. The Chinese have not gone as far as confirming what Tillerson said, but interestingly enough they also did not deny it.

If North Korea does not back down or come up with some pacifying and acceptable statement before the end of the Olympics, or if renewed diplomatic efforts do not show signs of progress, the war maybe a reality.

--o--

WEAPONS OF MASS DELUSION

Both the US and Canada announced in mid-December that the sale of some lethal weapons to Ukraine would henceforth be authorised. Those, including President Poroshenko, who have argued for more active support for Ukraine on the part of Western countries rejoiced. There is, however, limited ground for celebration.

President Poroshenko, Foreign Minister Freeland, Kyiv, December 21st
©Website of the President of Ukraine

First, allowing the sale of weapons is not the same as providing weapons. It may become legal to export certain weapons, but in the absence of outside funding, Ukrainian buyers will have to pay for their purchases. It is not clear that funds are available for that purpose in Ukraine, or that the US or Canada would provide funding assistance directly related to such purchases.

Second it is not clear either that the weapons that have been cleared for export to Ukraine are needed or would make any difference in the ongoing conflict in Eastern Ukraine. The US statements refer to defensive weapons, the Canadian one to automatic weapons. There was speculation about the sale of some anti-tank weapons, but US officials seemed reluctant to provide any details.

When it comes to assessing Ukrainian weapon needs, it might be useful to remember that Ukraine is itself a large exporter of weapons, consistently ranking among the 10 top exporters. The weapons in question are mostly leftovers from the large arsenal of weapons that were stored in Ukraine during the Soviet period. The state of conservation of the weapons in question occasionally comes into focus when major explosions in destroy part of the arsenal, as was the case twice in 2017.

As for Canada, when it comes to authorising the export of weapons, the long-standing policy is that weapons cannot be exported to zones of conflict. It is worth reading the fine print in the official announcement:

“This change will enable Canadian companies and individuals to apply for a permit to export certain prohibited firearms, weapons and devices to Ukraine. Each permit application will be assessed on a case-by-case basis to ensure its consistency with Canada’s international obligations and foreign policy and defence priorities. (…) Inclusion in the Automatic Firearms Country Control List does not guarantee that exports of prohibited firearms, weapons and devices to a country will be approved.”

The gesture of authorising the sale of lethal weapons to Ukraine was highly symbolic. As could be expected, it upset Russia. Its actual impact remains, however, unusually vague for now.

--o--

SAAKASHVILI VS POROSHENKO, AND THE WINNER IS TYMOSHENKO

Mikheil Saakashvili
Facebook Profile

Mikheil Saakashvili continues his anti-corruption popular campaign that more and more looks like an anti-Poroshenko action. As legal attempts to either arrest or extradite Saakashvili have not succeeded, attempts were made to discredit Saakashvili by releasing a conciliatory personal letter he had just sent to Poroshenko. After the release of the first letter, Saakashvili wrote a second open letter in which he called for Poroshenko to resign, hinting, rather arrogantly, that resignation might result in “mitigation of punishment as well as pardon,”. Poroshenko created the problem by stripping Saakashvili of his Ukrainian citizenship, but cannot get rid of him through legal or political means. Saakashvili’s stature protects him so far from non-legal attempts, but his popular following is not strong enough to topple Poroshenko. He can however continue to annoy Poroshenko for the foreseeable future, especially now that Poroshenko has refused his peace proposal. The real impact is the constraint it imposes on Poroshenko’s attempt to work usefully at his campaign for a second presidential mandate, which he seems intent on seeking. This serves the interest of Yulia Tymoshenko, former Prime Minister and Poroshenko’s main challenger, who seems to be making a come-back in public opinion polls.

Yulia Tymoshenko
Facebook Profile

--o--

NEW GUIDELINES, OLD RIVALS

President Trump just announced a new National Security Strategy (NSS). It is based on four pillars:

Protect the homeland, the American people, and the American way of life

Promote American prosperity

Preserve peace through strength

Advance American influence

Two countries have been named as major "revisionist powers" attempting at rivaling the US: Russia and China and, as the text of the NSS memorandum goes, "use technology, propaganda, and coercion to shape a world antithetical to our interests and values".

Curiously and of note, China is mentioned 12 times while Russia only 6.

It did not take long for the Chinese rebuff. The Ministry of Foreign Affairs in Beijing categorically rejected being branded as an expansionist and revisionist. The Kremlin spokesman Dmitry Peskov shrugged the matter off, saying he could see traces of an “imperial nature” in the NSS “as well as unwillingness to abandon the unipolar world idea and accept a multipolar world. Some observers in Moscow sardonically commented that few people managed to do so much with so little to bring Russia and China closer together. This document owes a lot to President Reagan's principled stand in his Cold War strategy.

Trump allegedly participated directly in the elaboration of this new strategy. Whereas it will serve as guidance for the Administration as a whole, this does not mean that he will not improvise, depending on political circumstances or his own mood swings.

--o--

REX TILLERSON: TRUMP'S FOREIGN POLICY GLADIATOR

Secretary of State Tillerson, PM Trudeau, Ottawa, December 19th
©State Department

Rumors about the imminent resignation of Rex Tillerson as US State Secretary do persist but are most likely slightly exaggerated. While it looks certain that Rex Tillerson will not remain part of Trump's team until the end, today he serves a purpose: Tillerson’s more diplomatic approach, often contradicted by his boss (in his night-time tweets, or statements) and this tandem of foreign policy "bad cop, good cop" approach seems to be working for the time being as far as the White House is concerned. Boris Johnson, the British Foreign Minister, who visited Moscow in December, expressed different, sometimes controversial views, but we can be certain that all of it was coordinated with PM May. In Tillerson's case no foreign colleague of his can ever be certain that the next day White House would not either correct, deny, or even totally contradict what Rex stated. 

Not so long ago, the State Secretary assured the media that his negotiators were ready to travel to North Korea for some diplomatic efforts to ease the tensions. Two days later on his official visit to Asia, President Trump denied that such plans were in the works and put his personal touch on it by advising his State Secretary not to "waste time" on fruitless talks. As some observers noted such unconventional approach may have some purpose: to disorient enemies and allies alike to pursue certain political objectives.

Tillerson may, however, be remembered for having presided over the atrophy of the State Department, leaving a large number of positions unstaffed. The damage done to the institution is likely to be felt for years. The traditional US interests as defined by the liberal leaning State Department do not fare well against the more isolationist “make America great again” approach.

--o--

PERSON OF THE MONTH: PATRICK POUYANNÉ, CHAIRMAN AND CEO, TOTAL 

Patrick Pouyanné took over as head of Total in October 2014, after Christophe de Margerie was killed in a tragic accident at Moscow's Vnukovo airport. Total's executive jet was rammed by a fuel truck driven by a drunk employee. The three crew members also died. The driver was sentenced to prison time.

Total is one of the 7 "supermajor" oil and gas companies, which means that it covers the entire cycle of oil and gas from exploration, production, power generation, transportation, refining, product marketing and global crude oil and product trading. The company has a work force more than 100,000 people in 130 countries. Its total assets amounted to USD 230 billion in 2016, while profit was over USD 6 billion.

Total carries a special significance for the Russian economy and investment environment. At the time when Western sanctions substantially undercut Russian joint projects with scores of Western partners, Total not only remained in Russia during this difficult period, but also actively took part in the gigantic Yamal LNG project.

Yamal LNG processes natural gas from the giant onshore South Tambey gas and condensate field, located on the Yamal peninsula. The project includes an integrated gas treatment and liquefaction facility with three trains each having a capacity of 5.5 million tons per year, storage tanks, port and airport infrastructures. The construction of the first train as well as of the logistic facilities was successfully completed with more than 30,000 personnel actively involved on site at peak. The second and third trains will be commissioned in 2018 and 2019 respectively.

The project is operated by Yamal LNG Company, owned by Russian independent gas producer Novatek (50.1%), Total (20%), CNPC (20%) and Silk Road Fund (9.9%).

On December 8th, 2017 Total announced that the first cargo of liquefied natural gas (LNG) from Yamal LNG is ready to leave Russia. This first shipment is a big step for Yamal LNG and the Russian energy export structure, one of the biggest liquefied natural gas projects in the world. Yamal LNG has reserves of 4.6 billion barrels of oil equivalent in Northern Russia.

Symbolically, the first Russian tanker built for this project was named after Christophe de Margerie.

©Total

--o--

CHINA'S ONE BELT ONE ROAD INITIATIVE (OBOR), EURASIAN ASPECT

Four years ago when Beijing came up with the exotic initiative to resurrect in a modern context the ancient Great Silk Road that goes back more than 2,000 years and in its heyday dominated trade in Asia, Middle East, South Europe and Africa, it was not taken seriously. Today it has gained strategic and political traction. OBOR is not a unified political or economic structure. It is rather based on specific agreements with one or a group of countries that could serve as major junctions along that way. The main routes of the OBOR will go through Eurasia: Russian and Kazakhstan's Trans-Siberian railroads, Georgian and Turkish ports with further routes to the Middle East, Southern Europe plus auxiliary paths into Africa. On the surface it looks like a grand, but conventional plan to deliver Chinese-made goods all over the world by the shortest and cheapest possible route. On a deeper level, it brings with it joint investments into transit countries’ economies, joint projects (logistical, industrial or scientific) and consequently becomes a global project.

Politically, the gradual and long-term implementation of that project requires reduction in military conflicts along the way such as, among others, Ukraine-Russia in Donbass, Azerbaijan-Armenia in Nagorno-Karabakh and Afghanistan’s permanent civil war.

The question is whether OBOR can help to reduce the intensity of local conflicts in favor of trade and coexistence or whether it will fail to do so and remain only a hypothetical construct.

--o--

BRIEFLY NOTED

NORTH KOREA

A BGN source in Ottawa's diplomatic community confirmed that the conference that Canada is trying to arrange in Vancouver involves the participation of the US, Russia, China, South Korea and Japan to discuss the growing tensions around the North Korean nuclear program and overall rising chances for a full scale war between North Korea and the US. Russia's relations with Canada are at an all-time low, but it seems so far Russia is ready to come if China agrees to join. So the only hold out is China as Beijing has yet to reply positively to the invitation.

RUSSIA

The Central Election Committee denied Alexei Navalny, a Russian opposition leader, the right to register as a candidate for the March 18, 2018 presidential election on account of his criminal conviction for economic crimes. In a widely disputed and politicised verdict, Navalny was handed a 5-year conditional sentence. Alexei Navalny is the most notable opposition candidate and has election offices in dozens of Russian cities. His campaign attracted many dissatisfied voters, mainly younger generation of Russians. His presidential campaign dealt mainly with the widespread corruption of Putin and his inner circle and, to a lesser extent, the annexation of Crimea and certain aspects of Putin's foreign policy.

UKRAINE-RUSSIA 

After months of intense negotiations between Kiev and the self-proclaimed Eastern Ukrainian republics part of an all-for-all exchange of POW's took place on December 26^th.

In November Putin and Medvedev met the special envoy of the Ukrainian President, Mr. Medvedchuk and the deal was finalized. The Ukrainian side has returned 306 prisoners and separatists 76. According to the deal, this is only the first phase of the prisoner exchange and more swaps are planned for later dates. This is the first prisoner exchange in 14 months. The conflict, according to human rights organizations has claimed over 10.000 lives.

The conflict is far from a peaceful resolution, but this prisoner exchange is a step in the right direction.

UZBEKISTAN

President Shavkat Mirziyoyev spoke on the phone with Donald Trump on December 19. He assured the American President that Uzbekistan is fully committed to the war against Islamic terrorism especially in light of a deadly car attack in New York City by an Uzbek national who pledged his alliance to ISIS. Uzbekistan also has a long border with Afghanistan and the White House counts on Uzbekistan's help in assisting America's efforts in the area. Uzbekistan's foreign policy is known for its balanced approach and friendly relations with both Moscow and Washington.

MOLDOVA

Moldova's government recalled its ambassador from Moscow for "consultations" as a gesture of protest against Moscow's attempts at undermining this country's efforts to strengthen its ties with EU. Moldova's president Igor Dodon, who is known for his pro-Moscow position, has condemned his government's actions. As a sign of its inevitable movement westwards, Moldova changed the name of its official language from Moldovan to Romanian. 

SYRIA

During his December 11^th visit to Syria, President Putin announced the withdrawal of Russian troops from Syria. At the same time, he also re-confirmed that Russia would keep two military bases in Syria, the old one for the navy in Tartus and the relatively new one for the air force in Hmeimin, so that "they could deal a crushing blow to the terrorist threat should it rise ever again". Of note, in his congratulatory remarks to the troops, he thanked them for having defended the motherland, presenting the threat of terrorism originating from Syria as a direct threat to Russia itself. 

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.

Issue 13

THE BRETON/GEROL NEWSLETTER

PECULIARITY OF A POLITICAL BROMANCE

Presidents Putin and Trump, Danang, Vietnam, November 11th
©President of Russia Website

Two meetings in November, the APEC Summit in Vietnam and the ASEAN Summit in Manila, had been considered to be the best possible platform for presidents Trump and Putin to hold personal one-on-one meetings. Trump had even shared a potential agenda for that. Russians, after a year of Trump presidency, have, however, learned how to be cautious when it comes to Donald Trump’s promises. Already in Vietnam, the American side offered Putin and his delegation to hold a meeting at the American premises at the Summit. The Russian side rejected the offer with the suggestion to hold the sit down at a neutral site on Summit premises. This time, the American side refused and the long anticipated meeting between Putin and Trump did not take place. The not very well camouflaged reality of the situation is that Trump avoided a direct meeting with Putin due to the ongoing investigation back home into allegation of collusion and Russian interference into the 2016 elections. The White House thus made sure that the meeting with Putin would not take place in Vietnam. There was a brief handshake, exchange of a few words, but nothing of substance took place. A joint declaration on Syria was released, but even that was presented as the work of Tillerson and Lavrov. It looks like the Russians understood the Administration's dilemma and blamed the absence of a meeting on technicalities. To avoid another mishap of that kind, Putin decided not to travel to Manila for the ASEAN Summit next day but dispatched his trusted, harmless sidekick Prime Minister Medvedev.

The compensation took form in a lengthy telephone conversation between Trump and Putin covering all major issues of the day between two countries: Syria, Ukraine, and North Korea.

There is an undeniable chemistry between the very different intellects and personalities of Putin and Trump therefore the world can only hope that sooner or later the leaders will be able to sit down together for a long and detailed discussion on the most burning global issues.

--o--

COURTING CHINA

Presidents Putin and Xi Jinping, Danang, Vietnam, November 10th
©President of Russia Website

Moscow's expectations for close partnership with China, at least on the political level, have not materialized. The ASEAN meeting in Manila proved that economic cooperation with the United States influences Chinese policy internationally more than any other consideration. China agreed with President Trump to ease the flow of American goods into the Chinese market. While ideologically and philosophically Beijing's rulers are closer to Moscow's traditions and interpretation of reality, first and foremost they are pragmatic. This is expressed by the recent Chinese decision to start negotiations with US companies on the possibility of purchasing American condensed gas. That move takes place in parallel with several contracts that China has with Russia’s Gazprom. In a significant move Chinese banks removed themselves from financing the construction of the Kerch bridge that will connect the Russian mainland with Crimea. At the same time, China keeps its multi-billion dollar deals with the Russian military industrial complex and continues to invest heavily into Siberian infrastructure. Both Moscow and Washington compete for Beijing's attention. President Trump asked China to exert serious pressure on the North Korean regime. Following his request, China dispatched an envoy to Pyongyang and suspended air travel between two countries. Moscow, on the other hand, wants to coordinate with China a less confrontational approach to Kim and his nuclear games. China, wisely, goes along with that approach as well.

China achieved a strategic advantage: Moscow and Washington more than ever look to Beijing for global solutions.

--o--

UKRAINE: SOLEMN REMEMBRANCE, EU PROMISES AND, STILL, MR. SAAKASHVILI

President Poroshenko paying tribute to the victims of the Holodomor of 1932-1933, November 25th
©President of Ukraine Website

In Ukraine, November 25^th officially marks the “Day of Remembrance of the Holodomor Victims of 1932-1933”. The Holodomor is also being called, among other names, the Great Famine. President Poroshenko participated in commemorative events and issued the required statements. He also took a few predictable shots at Russia as successor state of the USSR. The fulfillment of these presidential duties immediately followed Poroshenko’s visit to Brussels on the occasion of the Fifth Eastern Partnership Summit with the EU. Beyond the usual re-affirmations of support for Ukraine from the European Union, Poroshenko singled out the fact that he “managed to unite the European Union around the idea of a peacekeeping mission in the Donbas”. On this issue, Poroshenko allows himself a rather generous reading of the rather general wording in the final statement of the Summit.

The emphasis on the role of the European Union is, however, far from misplaced. If any progress can be made in resolving, even partially, the conflict in Eastern Ukraine in the near future, the impetus will have to come from two EU leaders already active on this file, Chancellor Merkel and President Macron. Through their personal involvement in the discussions with Ukraine and Russia, they may be able to arrive at a modus vivendi that could open the door to a relative normalization of relations with Russia, including the removal of some sanctions. With a new president being elected in Ukraine in 2018, a lesser dependence on the military conflict as a unifying factor might lead to a workable and permanent ceasefire. As for the Trump administration, it is, for the foreseeable future, in no position to procure an arrangement that would satisfy Moscow without that being called in the US a concession to puppet master Putin. In other words, regardless of possible EU-inspired incremental progress, Ukraine will, for the foreseeable future, remain a bone of contention that will prevent the US and Russia from significantly improving their relationship.

As for Mikheil Saakashvili, he seems to have boundless energy: despite the harassment of some of his personal associates, he continues to rattle President Poroshenko’s chain with his popular campaign against corruption and the oligarchic system. Whether the campaign will lead to actual political change or become a permanent distraction remains to be seen.

--o--

PRE-ELECTION SHUFFLE: PUTIN'S STYLE

President Putin meeting with former regional leaders, Moscow, November 2nd
©President of Russia Website

The first step in renewing the upper echelon of regional power in Russia was a large-scale dismissal of governors, including those who were with Putin from his early days as President. In his speeches and press-conferences Putin has justified such a move as needed for the modernization of political mechanisms, more precisely a move away from the command and control system to a more efficient and innovative one. Considering that the Russian economy finally shows some moderate growth, it is, according to Putin, essential to replace the old guard with younger, more imaginative, educated and independently-minded (to certain extent, of course) people who would deal with local development issues without looking over their shoulder while constantly seeking approval from the President. One could argue that Putin is trying to improve the system he himself created. At one point (2000-2006) when Russia was in deep decline and disarray, Putin's power vertical was a necessary model, but a decade later such an approach proved to be outdated and inefficient.

--o--

SYRIA: VLADIMIR PUTIN, MARATHON MAN AND PLAY MASTER

Presidents Assad and Putin, Sochi, Russia, November 21st
©President of Russia Website

Only in November, and mostly in connection with the conflict in Syria, Vladimir Putin called the presidents of France and Kazakhstan, had a long conversation with the US President, received the President of Turkey, called the Emir of Qatar, received the President of Syria, called the US President, the King of Saudi Arabia, the President of Egypt, the Prime Minister of Israel, and then held a trilateral meeting with the Presidents of Iran and Turkey.

Two observations follow. If anyone ever doubted that Russia, through Putin himself, and to the chagrin of the US foreign policy establishment, was leading on the Syria file, those doubts are proven groundless. As well, as Putin previously stated, Russia engages all possible interlocutors in the conflict and is in a position to have a dialogue with all parties, an undeniable comparative advantage.

Even though there is acknowledgement that the military phase of the conflict in Syria is far from over, the emphasis, especially in the conversation with Bashar El Assad was on the post-conflict normalization of the situation in Syria, and the proposal to convene in Sochi a congress of Syrian national dialogue. The expressed objective is a long-term normalization of the situation in Syria. As noted in the joint statement issued by the Presidents of Iran, Turkey and Russia, the day after Putin’s meeting with Assad, the expressed objective is the adoption of a new constitution, that has the support of the Syrian people, and the conduct of free and fair elections in which all Syrians entitled to vote could participate and which would be suitably observed by the UN. It seems unusual for such a promotion of democracy to emanate from the three countries in question rather than from the EU or the US. The proof will, of course, be in the implementation. Whereas Syrians themselves, after years of a bloody conflict, may be ready for a transition to democracy, a key element will be the attitude of the other main regional players toward this process.

--o--

SYRIA: SHOULD THEY STAY OR SHOULD THEY GO?

Presients Rohani, Putin and Erdogan, Sochi, Russia, November 22nd
©President of Russia website

Now that the Islamic State has virtually lost all the territory it used to control in Syria, it is no longer possible to accuse the Russia-Iran alliance to have targeted only the Syrian rebels opposed to President Assad. The routing of ISIS is too evident and too far-reaching to have been only the work of the USA and its Kurdish allies. Donald Trump may claim that under his presidency the US fight against ISIS has dramatically improved, but few observers would pay attention to his usual exaggerations. The question as to who is fighting whom has now shifted from a question for Syria to a question for the US. If no longer fighting ISIS, what adversary are the US troops in Syria fighting? The US joining with Russia, as noted above, in supporting the territorial integrity of Syria does not absolutely mean that there could not be a US military presence in Syria. The US could invoke its previous commitment to the Kurds and even pretend it has an implicit an international mandate to be in Syria. The objective would be to continue undermining Assad’s presidency as well as to prevent Iran from cementing its position in Syria. Russia, that has voiced the expectation that US troops would leave Syria would be upset, but not as much as President Erdogan for whom the Kurds in Syria are only an extension work of his own Kurdish problem at home. Saudi Arabia and Israel, allies of convenience, as Israel recently admitted, would see the continuing presence of US troops in Syria as standing up to Iran and Hezbollah.

Even more problematic is the presence of Turkish troops in Syria as well the support of Turkey for certain rebel groups in Northern Syria. The alleged US promise no longer to provide weapons to Kurdish forces will not be enough to make Turkey adopt a more hands off approach, even though Turkey also joined Iran and Russia in supporting the principle of territorial integrity of Syria.

--o--

SYRIA: THE MOSSAD FOOT NOTE

The Russian presidency report on the November 21^st phone conversation between President Putin and Prime Minister Netanyahu has some interesting final words. “Both parties expressed interest in furthering mutually beneficial cooperation in a variety of areas, including contacts between special services.” In other words Russian security services and the Mossad, their Israeli counterpart, are expected to cooperate even more than is already the case. This is obviously a way of assuaging Israeli fears about Hezbollah/Iran presence in Syria. It should also make Donald Trump feel less guilty about allegedly sharing Mossad intelligence with Russia. The Russians most likely already had the intelligence in question, and maybe more.

--o--

THE DOGS BARK, THE CARAVAN MOVES ON

Presidents Putin, Rohani and Aliev, Teheran, November 1st
©President of Russia Website

A relatively unnoticed trilateral meeting took place in Teheran in early November. The Presidents of Azerbaijan, Iran and Syria got together for a discussion that was ostensibly focused on economic matters, namely transportation infrastructure and the delivery of energy.

The key issues to mention include:

• The continuing support for the development of the North-South rail corridor that allows shipments to travel from India via Iran to Russia.
• Russia, Iran and Azerbaijan are large hydrocarbon producers: they do not have to compete, but instead can and should coordinate their efforts.
• For logistic reasons, the three countries have an interest in supplying hydrocarbon to each other.

Russia is taking advantage of the international political situation to develop its economic relationship with Iran. The pivot to the east includes the Middle East.

By involving Azerbaijan, Russia prevents the emergence of a competitive energy cluster centering on Azerbaijan. The recent opening of the Baku-Tbilissi-Kars rail route (linking Azerbaijan to Turkey through Georgia), whose initial purpose was to bypass Russia, is no longer seen as so threatening for Russia.

--o--

PERSON OF THE MONTH: RECEP TAYYIP ERDOĞAN

November was a month of intense political activity for the Turkish president, who shuttled between Russia, Iran and key Arab states. This hyper activity culminated in a Joint Declaration issued  in Sochi by Erdogan, Putin and their Iranian counterpart Rohani on post-war security and cooperation in Syria. In this newly formed triad the most challenging position was that of Erdogan: he always insisted that Syrian President Assad had to go and Turkish relations with Iran were always strained to say the least, but he managed to overcome his own pre-conceived notions and adapt to the new political reality. The reward for Turkey was in the acceptance by Russia, Iran and the Assad regime of a Turkish role and influence in the parts of Syrian territory bordering Turkey, including Turkey's “control” over Syrian Kurds in the area. Erdogan’s relations with the United States meanwhile are worsening. Erdogan stubbornly insists on the extradition of Fethullah Gülen, a Turkish religious leader living in exile in the US, who according to the Turkish President was behind the failed July 2016 coup in Turkey. General Flynn, Former National security adviser to President Trump, has been accused, among other things, of accepting $500,000 from Ankara to lobby in favour of Gulen’s extradition. Soon after announcing that Turkey was not interested anymore in pursuing EU membership, Erdogan made more serious hints: Ankara was mulling a possibility to leave NATO, the alliance Turkey helped to establish. Moreover, Turkey already paid $2.5 billion for the Russian made S-400, the most advanced Russian anti-aircraft missile system, triggering strong criticism by the US.

November was a good month for Erdogan but the future may not be as rosy. Growing internal instability, continuing repression within Turkish society and the Army, along with corruption charges against the president and his family, could derail Erdogan's populist drive and make him a target of popular discontent.

--o--

CANADA-RUSSIA RELATIONS AT LOWEST POINT EVER

Minister Lavrov
© MID Russia

Minister Freeland
© House of Commons

It was Russia that formally breached the Budapest Memorandum of 1994 which guaranteed Ukrainian territorial integrity in exchange for Kiev's transfer of its Soviet-made nuclear arsenal to Russia (Ukraine at the time had operational control over the third largest nuclear arsenal in the world). By absorbing Crimea and throwing its support behind Russian-speaking separatists in Eastern Ukraine, Moscow initiated the conflict between Ukraine and Russia. The US and most EU countries, while staunchly supporting Ukraine in this conflict, also see its complexity and possible solutions rather than just a black and white picture. They continue to keep high-level contacts with Moscow including among foreign ministers and heads of governments. After all, Russia continues to be one of only five permanent members of the UN Security Council, and a major player on the world stage. Canada practically cut every meaningful political contact with Russia, removing itself from any possibility of playing a constructive role in possible solutions to the crisis. Maybe Ottawa should undertake modest steps to rejoin its traditional allies and restore some degree of functionality in its relations with Russia, if only to have a chance to advance other Canadian interests than Ukraine.

--o--

BRIEFLY NOTED

CHINA-NORTH KOREA

Early in the second half of November, China sent one of its high-ranking officials to North Korea. According to Seoul sources it was Lee Bon Young, the deputy chairman of the special security committee that supervises different branches of the Chinese intelligence services. Surprisingly Mr. Lee was not received by Kim himself. Negotiations took place with a group of senior army officers. Observers in Hong Kong and mainland China believe that the talks in Pyongyang failed to convince the North Korean side to slow down its nuclear ambitions. This assessment proved to be correct: three days upon the Chinese delegation return to Beijing, China abruptly cut all flights to North Korea.

On November 29th, North Korea tested another ballistic missile, for the first time in two months. The missile, according to North Korea, held a warhead capable of re-entering the earth's atmosphere and could have hit the US mainland. The North Korean leader reportedly stated that North Korea is now a true nuclear power.  

ARMENIA

After having made a "friendly" official visit to Russia in mid-November, Serge Sargsyan, the President of Armenia attended for the first time the Eastern Partnership Summit in Brussels to witness the signing of the European Union-Armenia Comprehensive and Enhanced Partnership on the 24th of November. The reaction of media in Russia was predominantly negative. The Kremlin meanwhile refused to comment. Brussels however felt it necessary to issue a special statement emphasizing that the Eastern Partnership is not directed against Russia, but, on the contrary, will bring Russia and its allies to a greater level of cooperation with the European Union.

LATVIA

A special economic commission in Riga has concluded that the transit flow through the ports of Riga, Ventspils and Liepaya, that has traditionally been the backbone of the Latvian economy, had lost more than 30 percent of volume in recent years. Oil, steel, various agricultural products as well as other goods exported from Russia to Europe and Asia are now being increasingly directed through the ports of Murmansk, St. Petersburg and Ust-Luga - old and new Russian harbors. The reason is the rapidly worsening relations between Riga and Moscow. According to the Association of Latvia’s industrialists, there is a need to get out of this crisis and begin movement towards some degree of economic cooperation.

COUNCIL OF EUROPE

The Parliamentary Assembly of the Council of Europe (PACE) announced its intent to ease up the previously enforced sanctions against Russia and gradually make Moscow again a full-fledged member of PACE. Two years ago Russia was deprived of its voting power as a result of events in Crimea and Donbas. This latest pronouncement triggered a strong condemnation by Ukraine.

UKRAINE

A recent mini-coup in Luhansk, the main city of the self-proclaimed Luhansk Republic resulted in the resignation of Igor Plotnitsky and appointment, in his place, of Leonid Pasechnik as interim leader. The real reason behind the dismissal of Plotnitsky was that Mr. Pasechnik, the former State Security minister in that turbulent part of Donbas, appeared to be more radical in its separatism and anti-Ukrainian stand. BGN sources confirmed that one possible scenario for the development in that part of Ukraine controlled by separatists could be the unification of the two self-proclaimed republics (Donetsk and Luhansk) into one entity. Technically, this could ease the implementation of the Minsk agreement. Some observers, however, point out that such a development could only strengthen Moscow's control over the area.

RUSSIA-JAPAN

Complex and strategic, two-tracked negotiations recently began in two working groups of Russian and Japanese economists, logistic specialists and scientists. The talks will explore possibilities to increase the volume of Japanese exports to Europe through the Russian Northern Sea Route which potentially can shorten time and costs of transit by one third. The second project under discussion sounds more monumental: the  construction of a bridge between the Northern Japanese island of Hokkaido and the Russian Far East mainland. This project could shorten export transit routes even more dramatically.

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.