BRETON/GEROL NEWSLETTER

Wednesday, July 31, 2019

Issue 33

THE BRETON/GEROL NEWSLETTER

NO END TO THE DEMOCRATS' WAR AGAINST TRUMP

As if his report was not enough in itself the US House of representatives led by Democrats invited the retired FBI director Robert Mueller to a marathon of testimonies in front of two committees. His testimony basically repeated the main points of his report's 444 pages that Donald Trump or people close to him were not guilty of colluding with Moscow during the 2016 presidential campaign. On the question of obstruction of justice, Mueller testified that the President could not be totally exonerated. He even made it clear that the President could be indicted once he leaves office. There may have been too much legal nuance in this for the full meaning of that statement to register with the audience.

Members of Congress continued to demand from White House the full of disclosure of Trump's one on one conversation with Putin during their summit in Helsinki last year. The White House refused to provide the content. The Congress for the third time tabled a Trump impeachment resolution. Though only 90 or so members voted for it, it shows that the crusade against Trump has become an obsession of the Democratic political establishment. This strategy is unlikely to help the Democratic party reclaim the White House in 2020. A credible candidate from a new generation of politicians might do that.

--o--

UKRAINE THAT WAS NOT, UKRAINE THAT COULD BE

The significance of the overall victory of President Zelensky’s party in the July 21st parliamentary elections cannot be overestimated. For the first time since Ukrainian independence in 1991, there will be political alignment between the Presidency and the Parliament. Admittedly, there was a relatively low turnout on July 21st, just below 50%. There are many possible explanations for such a low participation, from voter disaffection to the summer timing of the poll. Clearly though, the issue was not the popularity of President Zelensky who continues to keep a very high public opinion rating.

The results of the elections are an unmistakable rejection of the professional political class that essentially controlled the outgoing Parliament. Previous parliamentarians may have been duly elected, but they clearly no longer reflected the preoccupations of the electorate. The verdict is clear and, in some cases, brutal.

The mass arrival of new parliamentarians with limited political or even public life experience may cause the new assembly to go though unavoidable growing pains. This will be a small price to pay to have a parliamentary majority that focuses on the interest of the country and is not beholden to any oligarch.

To Russia, there may be a temptation of reading too much in the fact that the nationalist tendency in the new parliament will be greatly diminished. This in no way implies that there is a return to the “good old days”. Zelensky and his party may not define their objectives as against Russia, they will no less defend Ukrainian interests. They may, however, do so in a more pragmatic way, not only to spite the other side. The possible discussion about the reinstatement of direct flights between Ukraine and Russia is a case in point.

The fact that an openly pro-Russia party did well in the Eastern regions that border on the conflict area in the Donbass should neither be discounted nor exaggerated. These regions would still perceive a normal relationship with Russia as important for their long-term prosperity, but it does not alter their sense of belonging to a different country. They do not seek to rejoin the Russian Federation. There is nevertheless some irony in the fact that the pro-Russia party did better at the national level overall than former President Poroshenko’s party.

Poroshenko’s party did however gather slightly more votes than Zelensky’s among Ukrainian voters outside of Ukraine. The diaspora may not be so comfortable with Zelensky as it was with Poroshenko. Zelensky may be saying all the right things when it comes to the conflict with Russia, as he did during his early July visit to Canada, but he clearly does not have the same nationalist credentials or inclinations. His first language is Russian, his Ukrainian not so strong. His statement on the 1031st anniversary of the Christianization of Kievan Rus called for dialogue between churches “so that faith would unite Ukrainians rather than divide them”. This is very different from Poroshenko’s rhetoric. The statement was immediately welcomed by a representative of the Church supported by the Moscow Patriarchate.

Most important, the two main tasks now awaiting Zelensky are fighting corruption and ending the war in Donbass.

President Zelensky during a working visit to the Cherkasy region, July 31st
©President of Ukraine Website

On corruption, the work has already started. Within the limit of his constitutional authority, the President has already released some senior officials from their duties. He also made several visits to the regions, taking the opportunity to chew out local politicians for their ineffectiveness. Once the new Parliament is functioning, he will be able to move more broadly and appoint new personnel to key top positions, including that of Procurator General. The Presidential Administration has already prepared an anti-corruption strategy that will include the digitization of government work (to reduce the occasions for corruption) and a public education program that will promote zero tolerance to corruption.

President Zelenskyy and EU Council President Tusk visiting Stanytsia Luhanska in Luhansk region, July 7th
©President of Ukraine Website

As for ending the war in Donbass, a ceasefire is already in effect since July 21st. There have of course already been numerous violations, but the tendency is towards less military activity. There have already been some efforts to bring new life to the discussions under the Normandy format (Ukraine, Russia, France, Germany). Exchange of prisoners may be in the works. Even more important, however, will be what can be done to remove the blockade and re-establish the exchange of goods between rebel regions and the rest of Ukraine. This is part of Zelensky’s first objective of winning back popular support in rebel regions.

Altogether, the stage is set for Zelensky to carry out reforms that could substantially transform Ukraine as well as to create the conditions for ending the armed conflict in the Eastern rebel regions. From what has been accomplished so far, there is ground for optimism.

--o--

PERSIAN GULF-GULF OF TROUBLE

The conflict between Iran and the West is quickly becoming the most poignant conflict of our times. It is not only that the war may flare up at any time, but also that the Iranian drive to make a bomb and the crippling sanctions it is are under, are dividing the West. The European Union has already created new trade structures to circumvent the US sanctions against Iran and purchase Iranian oil through multiple intermediaries using various other currencies, but not US Dollars.

British ship seized by Iranian Navy on July 19th in the Strit of Hormuz

Russia meanwhile formally supports Iran, but does not associate itself with Tehran too closely. One of the possible outcomes of the current crisis could be a popular uprising of the Iranian population against the theocratic regime due to severe economic situation inside Iran. If this were to occur, it would change the whole situation in the region and beyond.

--o--

TRADE STATISTICS QUESTIONS

US President Donald J. Trump is the living proof that a misreading of trade statistics can lead to unfounded conclusions. In the case of the author of the “art of the Deal”, this may well reflect the view, based on his own business experience, that in any trade relation one of the parties gets done in by the other e.g. China versus the US. It may also reflect the prejudice that the only good deal is the one he himself negotiated e.g. NAFTA versus its expected replacement, the USMCA.

Trumpism aside, a careful reading of diverse trade statistics can offer interesting insights. Put together, the following three observations are of interest:

• Between 2016 and 2018 Canada-Russia overall trade increased by 36%

• Between 2016 and 2018 EU-Russia overall trade increased by 32%

• Between 2016 and 2018 overall Russia world trade increased by 37%

The interpretation that might be offered on the basis of the above is that, after the 2012 recession and the impact of the imposition of Ukraine-related sanctions on Russia beginning in 2014 had a negative impact on trade with Russia, the tendency has now been reversed. Trade with Russia is inching its way back to the maximum level reached in 2012.

The related conclusion one might also be entitled to draw from the above is that sanctions imposed against Russia and counter-sanctions imposed by Russia are no longer having much real impact on trade flows. On the basis of the strong attendance by businesspeople from all over the world at the June 2018 St.Petersburg International Economic Forum and other similar business events, it seems that such a conclusion is already broadly shared.

--o--

PERSON OF THE MONTH,

BORIS JOHNSON

Boris Johnson has become the United Kingdom’s new prime minister — and is poised to lead the country out of the European Union.

Johnson was born in 1964 in New York City. He graduated from Eton and attended Oxford and other prestigious schools. Johnson had a successful career in journalism working for The Times, Daily Telegraph and finally as an editor of The Spectator (until 2005), before becoming the former mayor of London from 2008 to 2016.

Boris Johnson is a modern, British conservative. He is an obvious Eurosceptic, but socially a liberal. His extravagant behavior and his wit served him well and for that reason his popularity goes well beyond strictly conservative constituencies.

Boris faces perhaps the most daunting and immediate challenge of any British prime minister since Winston Churchill during World War II.

Aside form the Brexit saga, the U.K. has been pulled headfirst into a standoff with Iran, and with it a delicate balancing act between Washington and Europe in terms of how to respond to Iran. So far, exploiting UK's political mess and Brexit quagmire, as well as a very uncharacteristic passivity of the famed British Navy, Iran had the upper hand. The whole world is watching what, if anything will be done with the new PM at the helm.

There are four items on the new PM's short work list:

1. Iran

2. Brexit

3. Beating Labour Leader Corbyn at the upcoming elections (which will be hard without scoring the first two),

and distant 4th would an attempt to slightly improve relations with Russia.

He has a fan at the White House who already described Boris Johnson using his trademark phrase "great guy".

Others, on a slightly more intellectual side, for example Conrad Black who was Boris' boss at one time predict that he will be an excellent PM. The media and the left-leaning political circles are obviously not crazy about Boris. For them he is too unpredictable, too free with his language or using the Orwellian newspeak, not a "good thinker". The fact that he is liked by Trump also does not sit well with many Brits.

One thing is to win your party. Quite the other is to win the country.

It will be exciting right out of the gate.

--o--

MOSCOW PROTESTS AND ARRESTS

From 3,500 (according to the authorities) to 20,000 (according to protesters) people participated on July 27^th in an “unauthorised" protest against the exclusion of opposition candidates from city of Moscow elections to be held on September 8th. More than 1,000 people were detained during the protest. The reaction of the authorities has been to initiate criminal cases against some of the participants in order to discourage further protests. In response to the widespread Western criticism of Moscow police actions against the protesters, Russia Today compared these actions to the ones taken by the French police against the “gilets jaunes”. More than an actual threat to the prevailing political system, the Moscow events may be a prefiguring of upcoming challenges during any power transition at the national level that should take place in 2024.

The Central Election Commission is now reviewing the controversial applications and may find a way to reverse the previous exclusion of some opposition candidates.

--o--

UKRAINE SHIPPING

Ukraine’s Security Service (SBU) has arrested a Russian tanker that Moscow allegedly used to block three Ukrainian naval vessels before detaining them and 24 Ukrainian sailors in November near Crimea.

According to the SBU July 25^th statement, the tanker was detained by Ukrainian authorities after it arrived under the Russian flag at the Ukrainian port city of Izmail on the Danube River on July 24.

The 15 Russian citizens on board were released and sent back home. The ship itself was formally seized under a July 29^th Court order. It will now likely become another item on the long Kyiv-Moscow negotiating list.

--o--

CHINA'S NEW MILITARY DOCTRINE

Beijing issued a so-called 'White Book' where it spells out the main points of its new military doctrine. For the first time the doctrine mentions the nuclear weapons as an integral element of China's defense system while stressing that China will never be the first to use nuclear weapons. The doctrine also emphasizes Beijing's intentions to further develop its Pacific fleet and make it one of the most powerful in the world.

The first iteration of China's military doctrine...

China said it will require sustainable development of its military industrial complex based on its own resources. For the first time within its military doctrine it stated that China will continue to increase military cooperation with Russia.

--o--

SOUTH KOREA-RUSSIA

Russia says it has carried out its first ever joint air patrol with China, prompting both South Korea and Japan to send jets in response. The Russian defence ministry announced that four bombers, supported by fighter jets, patrolled a pre-planned route over the Sea of Japan and the East China Sea.

South Korean jest jets fired flares and machine-gun warning shots when Russian planes intruded.

Japan has protested both to Russia and South Korea over the incident.

LiancourtRocks, in Japan called Takeshima, in South KoreaDokdo

The alleged incursion happened over the disputed Dokdo/Takeshima islands, which are occupied by South Korea, but also claimed by Japan. Russian and Chinese bombers and reconnaissance planes have occasionally entered the zone in recent years, but this is the first incident of its kind between Russia and South Korea.

Russian Defense ministry said two of its Tu-95 strategic missile-carriers had joined two Chinese Hong-6K strategic bombers on the pre-planned route over "neutral waters". They were supported by fighters and A-50 and Kongjing-2000 airborne early warning and control aircraft.

--o--

BELARUS

Russian President Vladimir Putin held talks with his Belarusian counterpart, Aleksandr Lukashenko, in St. Petersburg on July 18 to discuss further integration within the Russia-Belarus Union State, a grouping that has existed mainly on paper after it was established in the 1990s.

In recent months, Putin and Lukashenko have held several rounds of talks on the integration, with the latter stressing that the partnership should be equal. Russia has been Belarus's main lender for many years and Minsk still owes Moscow large sums of money. Belarus's economy remains largely inefficient, and its external debt increased by $3.4 billion from July 2016 to October. In June, Finance Minister Siluanov said Moscow will lend more money to Belarus only after the two countries agree on furthering their integration.

President Lukashenko, Nikolai Lukashenko and President Putin at Valaam Monastery, July 17th
©President of Belarus Website

Lukashenko said after talks that he and Putin reached "agreements in principle on several issues hindering the integration between the two countries," including the price of Russian gas sold to Belarus. Earlier this year, Lukashenko told reporters Russia and Belarus still need to sort out a number of problems before talking about integration, adding that "the Russian leadership, especially the government, are not ready to go that way." In other words, despite recent positive statements, a lot remains to be done.

--o--

GEORGIA

Russian President Vladimir Putin has rejected a parliamentary call to impose sanctions on Georgia, saying patching up strained relations was more important than reacting to provocations by "scumbags.” Talking to reporters in St. Petersburg, Putin said he would stay away from "sanctions against Georgia out of respect for the Georgian people."

"For the sake of restoring full ties, I would not do anything to complicate our relations," Putin added.

In what appeared to be a reference to a crude verbal attack on him by a Georgian TV presenter, the Russian president said there was no point in taking seriously what he called the outbursts of "some scumbags."

Putin was speaking shortly after the Russian parliament unanimously backed a resolution urging the government to draw up economic sanctions on Georgia for his approval, a move that would have sharply escalated tensions between the two countries.

On July 7, Giorgi Gabunia, a host of a news-analysis program called Postscript on the Georgian opposition-run Rustavi-2 television channel, called Putin a "stinking occupier" and a "walrus c***" and vowed that he would defecate on Putin's grave.

Gabunia's tirade against Putin came at one of the most tense periods in relations between Russia and Georgia since they fought a five-day war in 2008.

--o--

MONGOLIA

Populist President Khaltmaa Battulga, who won an early July run-off election, is a real estate tycoon who has a Genghis Khan-themed amusement park as one of his assets.The leader of the opposition Democratic Party won just under 51% of the vote, giving him the majority needed to overcome parliament speaker Miyeegombo Enkhbold of the ruling Mongolian People’s Party.

President Battulga

Some investors have been wary of a Battulga presidency because of his calls for more state control of some mines and his suspicions of China, Mongolia’s biggest trade partner. Despite past protests, he has said he will stand behind plans to build a key railway to China from the enormous Tavan Tolgoi coal mine and has praised China’s Belt and Road pan-Asian infrastructure initiative.

Battulga captured the attention of voters who feel Mongolia received a bad deal on investments, promising greater government control of strategic mines, such as Rio Tinto’s, Oyu Tolgoi copper mine.

Mongolia is a parliamentary democracy. The government is run by a prime minister, but the president has powers to veto legislation and make judicial appointments.

--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.

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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PERSON OF THE MONTH: THERESA MAY

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.

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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.

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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.

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.

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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.

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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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