30 April 2014

Germany, Japan say G7 won't waver on further Russian sanctions

Reuters: 30. April 2014
Germany, Japan say G7 won't waver on further Russian sanctions
BY STEPHEN BROWN AND ANDREAS RINKE



German Chancellor Angela Merkel (L) talks with Japanese Prime Minister Shinzo Abe (C) and Italian Prime Minister Matteo Renzi (R), during the G7 meeting

Germany's Angela Merkel and Japanese Prime Minister Shinzo Abe said on Wednesday leading industrial powers would stand united on further sanctions against Russia if needed, despite Moscow's threat to retaliate against foreign energy companies.

Both are struggling to strike a balance between admonishing Moscow for annexing Ukraine's Crimean peninsular and failing to control pro-Russian separatists in eastern Ukraine, and looking after their countries' business interests and energy supplies.

The European Union, Japan and the United States have placed visa bans and asset freezes on dozens of individuals, some close to Russian President Vladimir Putin, but have held back on wider trade sanctions despite an escalation of the crisis in Ukraine.

Merkel said that if separatists holding observers from the Organisation for Security and Cooperation in Europe in eastern Ukraine do not free them, and Russia does not use its influence to secure their release, "then we should not shy away from the need for further sanctions".

"We have always managed to agree on G7 declarations so far and I see no reason why further steps should not be unanimous," she said after talks with Japanese premier Abe in Berlin, the first stop of his week-long tour of Europe.

Following a new round of Western sanctions aimed at business leaders and firms close to Putin this week, the Russian leader said he saw no need for counter-sanctions but might reconsider foreign firms' participation in areas such as Russian energy.

But Merkel said Europe, the United States and G7 partners would stick to their joint response to Russia, adding: "We have thought through these measures and we have no reason to question our unity on sanctions or see it in another light."

"Japan, Germany and the other G7 countries will work together on what possible further measures need to be taken," said Abe, though he said it was also "important to communicate with the Russian side". This is a view shared with Merkel, who has the most fluent contacts with Putin among Western leaders.

Both emphasized the importance of Ukraine carrying out free elections on May 25 to give people the democratic choice of who should succeed pro-Russian president Viktor Yanukovich, who fled Kiev in February in the midst of bloody protests.

ABENOMICS? NO THANKS

German Chancellor Angela Merkel and Japanese Prime Minister Shinzo Abe

Merkel offered encouragement for Japan's long battle against deflation, but rejected the idea of Europe - where policymakers including European Central Bank chief Mario Draghi have played down talk of a similar threat - copying Japan's new stimulus policies, nicknamed "Abenomics".

"We in Europe - and this is what the Bundesbank and others including the European Central Bank say - are not at immediate risk of deflation and our path of economic consolidation is the right one," said Merkel, who responded to the euro zone crisis by prioritizing fiscal discipline over pro-growth policies.

"Japan's situation is different and specific," she said.

Abe, who has begun to reverse years of sub-par growth with expansionary fiscal and monetary policies, told a business audience in Berlin earlier on Wednesday that Japan was now "in the process of freeing itself from long-lasting deflation".

His week-long visit to Europe will also take in Britain, Portugal, Spain, France and Brussels, institutions such as NATO and the Organisation for Economic Cooperation and Development (OECD), and meetings with European business leaders.

'From Kiev, no orders' as east Ukraine police slip out of control

Reuters: 30. April 2014
'From Kiev, no orders' as east Ukraine police slip out of control

Pro-Russian armed men level automatic rifles near the local police headquarters in Luhansk, eastern Ukraine, April 29, 2014.


The police of Luhansk had already stacked sandbags to the ceiling of their HQ in anticipation of trouble, during a month in which government buildings and police stations had tumbled to armed separatists across Ukraine's industrial east.

But nothing had prepared them for the assault they faced on Tuesday night by gunmen armed with automatic rifles, petrol bombs and stun grenades.

The city's police chief, Vladimir Ruslavsky, had little choice but to cede command, showing the assailants the letter of resignation they demanded, signed and faxed to the Interior Ministry in Kiev, said Tatyana Pogukai, a spokeswoman for the local police.


A pro-Russian gunmans prepares his weapon as his comrades are about to storm a regional police station building in Luhansk, Ukraine

The city government, prosecutor's office and television center had already fallen, in a major advance for pro-Russian separatists in their three-week-old uprising against the pro-Western government in Kiev.
"I was here all night," Pogukai told Reuters on Wednesday. "I slept on the floor."
"The station constantly sent messages that we were being stormed, that they were throwing grenades, but there was no answer," she said of the national police leadership in Kiev.
"There are no orders from Kiev. None at all. There's a feeling that for Kiev, Luhansk and the Luhansk police station simply don't exist."

The account of Tuesday's takeover in Ukraine's easternmost provincial capital, an hour's drive from the Russian border, reinforces the sense of a region slipping decisively from the grasp of a central government cobbled together barely two months ago amid the worst civil turmoil in Ukraine since independence in 1991.

Where it leads will likely be known after May 11, when the region's self-declared "People's Republic of Donetsk" holds a referendum on secession, echoing events in Crimea before its annexation by Russia in late March.

A group of Ukrainian police officers leave the administration building which has been captured by Pro-Russian activists in the center of Luhansk, Ukraine

Ruslavsky's officers never fired back, copying their comrades across this steel and coal belt who have sooner or later given up in the face of angry crowds armed with clubs and chains, often backed by well-organized gunmen in masks and military fatigues.

Some officers left, handing in their weapons, while others stayed and could be seen carrying out their duties on Wednesday in an uneasy cohabitation with the separatists. The ground floor windows of the headquarters were smashed and there were dents in the main gate.

UNRAVELLING


Pro-Russian activists storm the regional government headquarters in Luhansk

Approached by a reporter, the police directed questions to a man in civilian clothing who was talking and laughing with officers on the street. He gave his name as Denis, and was unarmed but held a two-way radio.

"Criminals are still criminals, despite the revolution," he said, explaining why the separatists would allow police to keep working. "The police have the data, the professional skills, and if you drive them off you'll have chaos."

Another separatist, who declined to be identified, said the men who carried out Tuesday's operation were loyal to Valery Bolotov, a retired military officer now one of the leaders of the separatist "Army of the Southeast".

Bolotov was named on a list of people slapped with sanctions by the European Union on Tuesday, in an as yet fruitless attempt by Western countries to slow the uprising.

The surrender and in some cases defection of the police represents a formidable blow to Kiev, which plans an election for president on May 25 but now has little control in parts of the east.

Pro-Russian activists gathered outside the regional police headquarters in Luhansk 

This week's sudden capture of Luhansk, along with neighboring Donetsk province which they have mostly held for weeks, gives separatists effective sway over the entire Donbass, the prized coal region where giant steel smelters and heavy plants produce around a third of Ukraine's industrial output.

Many native Russian speakers in the east feel aggrieved at events over the past five months in Kiev, where protests toppled Moscow-backed President Viktor Yanukovich in a tug-of-war between the West and Russia over the strategic direction of the former Soviet republic.

Ukraine's armed forces have held off any large-scale operation to wrest back control, both because of a lack of training and equipment and out of fear of triggering an invasion by tens of thousands of Russian troops massed on the border.

Ukraine's acting President Oleksander Turchinov on Tuesday ordered the dismissal of police chiefs in Donetsk and Luhansk, and his chief of staff said authorities had suspended eight commanders of the elite Alpha security service unit, accusing them of dereliction of duty.

But even that produced more disarray. The state security service (SBU) later disputed that one of the commanders had been suspended. There was also confusion over an announcement on the government website of military exercises in the capital, which the Defence Ministry said was untrue.

Remarks on Wednesday by Turchinov reinforced the sense of a state barely in control of a swathe of territory, unraveling along faultlines of language, culture and history.

"I want to say, honestly, that today, the operational units are not capable of taking control of the situation in two regions," he told a meeting of regional governors.
"Local law enforcement units are helpless, and some from those units either support or cooperate with the terrorists."



As a response to this situation the acting chief of the Ukrainian presidential administration Serhiy Pashynsky has said that seven territorial defense battalions have already been created.

Ukraine's military on full combat alert as separatists rage in the east

Deutsche Welle: 30. April 2014
Ukraine's military on full combat alert as separatists rage in the east



Ukraine's military is "on full combat alert" against a possible Russian invasion, acting President Oleksandr Turchynov has said. His comments came after pro-Russian gunmen seized more buildings in the country's east.

Speaking to a ministerial meeting on Wednesday in Kyiv, interim President Turchynov said, "Our armed forces are on full combat alert," adding that "the threat of Russia starting a war against mainland Ukraine is real."





Ukraine has already deployed some troops to try to take back control in the east.

Ukraine's defense forces have been on high alert for several weeks as armed separatists have seized more than a dozen government buildings in eastern Ukraine despite an operation by Ukraine's army and police to oust the pro-Russian groups.

Ukrainian pilots are now burning tons of expensive aviation fuel to frighten rebellious cities into compliance by roaring fighter jets above the heads

Most recently, armed insurgents took control of the city council building and police station in the city of Horlivka in the Donetsk region on Wednesday morning.

Turchynov told the cabinet meeting that "our number one task is to prevent terrorism spreading from the Donetsk and Luhansk regions to other Ukrainian regions."

The interim president also urged "Ukrainian patriots" to bolster the beleaguered police force who he said are "unable to carry out their duties of protecting citizens. They are helpless in those matters. Moreover, some of those units are either helping or cooperating with terrorist organizations."

Russia has deployed tens of thousands of troops to its shared border with Ukraine. The move has been viewed by the international community as precursor to staging of a military intervention or annexation. The Black Sea peninsula of Crimea was annexed by Russia in March and Russian President Vladimir Putin asserts he has a "right" to send his forces into Ukraine but has not yet done so.

The West has accused Russia of fomenting the crisis and has imposed sanctions to try and get Moscow to back down ahead of Ukraine's upcoming presidential elections on May 25.

Eastern Ukraine is made up of a large Russian-speaking population and was the heartland of support for former president, Viktor Yanukovych, who was ousted and fled to Russia in February.

The New York Times: 30. April 2014
Turchynov says police can’t control militias in east

The Acting President of Ukraine Oleksandr Turchynov says that the “overwhelming majority of security forces in the east are not able to carry out their duty to defend our citizens.” 

As pro-Russian gunmen seized another city in eastern Ukraine on Wednesday, the country’s acting president said the government’s police and security officials were “helpless” to control events in large swaths of the region, where at least a dozen cities are now in the hands of separatists.

With the admission by the country’s acting leader, Oleksandr V. Turchynov, that major chunks of the country had slipped from the government’s grasp, the long-simmering conflict in Ukraine seemed to enter a new and more dangerous phase. It was also the latest in a string of successes for what the West has called Russia’s covert strategy to destabilize Ukraine and discredit the interim government ahead of presidential elections scheduled for May.


Speaking at a conference of regional leaders in Kiev, the capital, Mr. Turchynov said the “overwhelming majority of security forces in the east are not able to carry out their duty to defend our citizens” in the industrial and coal-mining regions of Donetsk and Luhansk.

Mr. Turchynov also said Ukrainian forces had been brought to “full military readiness” because of the threat of an invasion from Russia, which has asserted its right to protect ethnic Russians and the Russian-speaking population in eastern Ukraine.

Ukrainian forces have been trying for weeks to rein in the pro-Russian militants, mostly local men who the White House believes have been organized and equipped by Russian special forces members operating under cover.

Two weeks ago, Ukrainian troops in a column of 21 armored vehicles set out for Slovyansk, the separatists’ stronghold, in an apparent effort to rout the militants holding the city’s main administration building. But the column never made it, and the vehicles were commandeered by the pro-Russian forces as many of the Ukrainian troops abandoned their posts.





Pro-Russian separatists on seized Ukrainian armoured vehicles

In his remarks, Mr. Turchynov acknowledged as much, saying that some members of the military were “cooperating with terrorist organizations,” a reference to the pro-Russian militias.

Hours before Mr. Turchynov spoke, pro-Russian gunmen seized government buildings in Horlivka, expanding their control over a swath of territory nominally controlled by self-proclaimed “people’s republics” opposed to Kiev.

The men seized the city police building and the City Council building early Wednesday morning, according to Igor Dyomin, a spokesman for the police in the Donetsk region. Anti-Kiev protesters seized a regional police headquarters in the city earlier in April.

A pro-Russia activist hangs a flag of the so-called "People's Republic of Donetsk" on the regional administration building seized by separatists

On Tuesday, armed militants occupied the regional government headquarters and prosecutor’s office in the regional center of Luhansk. There was no resistance from the local police.

Mr. Turchynov last week resumed what he called an operation directed at ousting the masked, pro-Russian forces that have seized buildings in more than 10 Ukrainian cities and towns since March. Russian news organizations, citing evidence from satellite photographs, claim that Ukraine has mustered its military forces near Slovyansk for an attack on the city.

That operation has largely fallen flat, and pro-Russian forces have established a string of barricades and checkpoints on major highways throughout the two regions.

In Slovyansk, the most heavily fortified stronghold of the anti-Kiev movement in eastern Ukraine, the government said it had eliminated three roadblocks in early morning confrontations with anti-Kiev militiamen.

Pro-Russian armed men in military fatigues stand guard outside a regional administration building they seized in the eastern Ukrainian city of Slavyansk

Militiamen confirmed that there had been small skirmishes with gunmen at checkpoints in the northwestern part of the city, but they denied that any ground had been lost to government troops. Neither side reported casualties in the clashes.

The police have ceased to operate in Slovyansk, where a citywide curfew takes effect at midnight. Pro-Russian militants in the city have taken journalists, politicians and others captive, including a German-led team of seven — military observers and an interpreter — working under the auspices of the Organization for Security and Cooperation in Europe.

Three bodies bearing signs of torture have been found in a river near the city in the last two weeks, but no suspects have been taken into custody. One of those killed was a lawmaker from Horlivka who had spoken out in favor of Ukrainian unity, and another was a pro-Ukrainian student from Kiev. The third body has not been identified.

Google Warning on Russia Prescient as Putin Squeezes Web

Bloomberg: 30. April 2014
Google Warning on Russia Prescient as Putin Squeezes Web
By Ilya Khrennikov and Anastasia Ustinova

A row of servers in Google's data center in Douglas County, Ga. The blue lights indicate that everything is running smoothly.


Chairman Eric Schmidt warned last year that Russia was “on the path” toward China’s model of Internet censorship. Vladimir Putin is proving him right.

With Russia locked in the worst standoff with the U.S. since the Cold War, the Russian president last week said his government needs to impose greater control over information flows through the World Wide Web, which the former KGB colonel called a creation of U.S. spy agencies.

Putin’s comments came after the lower house of parliament approved a draft law requiring Internet companies such as Google to locate servers handling Russian traffic inside the country, similar to Chinese rules, and store user data for six months. The legislation, which needs approval of the upper house and Putin’s signature to become law, also classifies bloggers with 3,000 or more readers -- about 30,000 people -- as “media” outlets, making them and their hosts liable for content and subject to regulation.

“This law is a step toward segmenting and nationalizing the Internet and putting it under the Kremlin’s control,” Matthew Schaaf, a program officer at Washington-based research group Freedom House, said by e-mail. “It could have a serious chilling effect on online expression in Russia, making users stop to think how their Google searches and Facebook posts could be used against them.”

Putin’s ‘Vendetta’

Russian intelligence agencies, just like their U.S. counterparts, constantly expand their cyber capabilities, Putin said at a meeting with media executives in St. Petersburg on April 24. Russia must protect its information in a market dominated by U.S. technology companies, said Putin, 61.

The bill on retaining user data follows a law enacted on Feb. 1 that gives Roskomnadzor, the communications regulator, the power to block without a court ruling websites deemed either “extremist” or a threat to public order.

Roskomnadzor did just that on March 13, when it temporarily shut off access to half a dozen sites, including opposition leader Alexei Navalny’s, to impede efforts to hold unsanctioned rallies against Putin’s annexation of Crimea. The regulator also closed 13 Ukrainian groups on VKontakte, a Russian site similar to Facebook.

Kremlin critic and opposition leader Alexei Navalny speaks with journalists outside a court in Moscow, on April 22, 2012, after listening to the verdict in the slander case against him. Navalny was found today guilty of slandering a municipal lawmaker and ordered to pay a hefty fine, the Twitter account of President Vladimir Putin's leading critic said.

“Putin sees a major threat to his rule from the U.S., with Ukraine being just the latest reason to attempt to discredit him,” said Alexei Mukhin, head of the Center for Political Information, a research group in Moscow. For Putin, “it has turned into a personal vendetta, so restricting the Internet is a necessary measure.”

‘Clean Conscience’

Russian agencies have been pressuring Internet companies for data on Ukrainians who supported the February ouster of that country’s Kremlin-backed president, Viktor Yanukovych, according to the founder of VKontakte, or VK, Pavel Durov.

Durov, who started VK in 2006, the same year billionaire Mark Zuckerberg opened Facebook Inc. to the public, said April 16 that he had sold his shares and stepped down as chief executive officer rather than comply with demands to turn over the personal data of Ukrainian users.

“I no longer have a stake, but I have something more important -- a clean conscience and ideals that I’m willing to defend,” Durov said on his VK page.

For foreign companies, relocating servers to Russia may not be worth the investment, meaning their services may stop being available to Russians, said Karen Kazaryan, an analyst at the Russian Association for Electronic Communications.

Beating Facebook

Building a data center for companies as large as Google and Facebook could cost as much as $200 million, Kazaryan said. Maintaining six months of data on every user might cost another $10 million a year, according to Kazaryan.

Moscow representatives of both Google and Facebook declined to comment on the legislation. Their U.S. offices didn’t respond to requests for comment.

Russia is one of the few countries where domestic companies beat U.S. competitors in search, e-mail, social networks and games, according to Dmitry Grishin, CEO of billionaire Alisher Usmanov’s Mail.ru Group Ltd., which owns VK and another social network called Odnoklassniki, both of which are more popular than Facebook in Russia.

“The move toward excessive regulation of the Web,” Grishin said by e-mail, “will lead to Russia losing the Internet as a unique sector that could’ve become a growth area for a new, post-industrial economy.”
Incompatible Russia

The shares of Mail.ru and its biggest domestic competitor, Yandex NV (YNDX), which handles 60 percent of all Russian-language searches, both fell more than 16 percent last week, the most ever. That pushed Yandex’s decline this year to 44 percent, making it the worst performer on the Bloomberg index of the most-traded Russian stocks in the U.S., after doubling in 2013.

The new legislation and other proposals by a Kremlin working group on online security jeopardize Russia’s Internet growth, the Kommersant newspaper reported yesterday.

The working group is proposing dividing data networks into three groups -- nationwide, regional and local -- which would make it easier for the government to monitor traffic, Kommersant said, citing unidentified people familiar with the matter.

Google's servers in its Council Bluffs, Iowa

Russia’s move toward greater control “sets a worrisome precedent and undermines the values that make the Internet great,” Peter Micek, a policy counsel for digital rights organization Access, said by e-mail. “We are seeing many governments that want to clamp down on what happens online. Our concern is that these questionable ‘nationalized’ approaches to Internet regulation risk spreading quickly.”

US Sanctions Raise Concerns for Foreign Investors

The Ney York Times: 30. April 2014
An oil production platform at the Sakhalin-I field in Russia partly owned by Russian Oil Company - Rosneft


LONDON — U.S. sanctions targeting the president of Russia's largest oil company could complicate the operations of Western oil companies with important investments in Russia, such as BP and Exxon.

The sanctions target only Igor Sechin, the president of Rosneft, and not the company itself. That means BP, Exxon and others will be able to continue to work with Rosneft, one of the world's biggest oil companies, to explore for and produce oil and gas.
For now.


Analysts are worried that the sanctions by the U.S. against Sechin are a prelude to tougher ones against Rosneft. That could force Western oil companies to abandon or suspend their partnerships and some very ambitious oil exploration plans.

"(Sechin) perhaps may not be able to go shopping in Paris in the foreseeable future, but that is not the same thing as penalizing the actual company," says Pavel Molchanov, an energy analyst at Raymond James. "That could be the next step, though."


Russian President Vladimir Putin warned late Tuesday that Western companies could eventually risk being shut out of Russia's energy sector.
Putin said he saw no reason for Russia to take retaliatory steps now against the U.S. and European Union, as he said the Russian government has proposed.
But "if something like this continues, then of course we will need to think about who works and how they work in the Russian federation in key sectors of the Russian economy, including the energy sector," Putin said.

BP, based in London, owns a 20 percent stake in Rosneft. ExxonMobil, based in Irving, Texas, has a broad agreement with Rosneft to explore for oil in the Russian arctic and across a wide region of western Siberia. Eni of Italy and Statoil of Norway also have deals with the Russian company.

Statoil and Rosneft move forward with Samara region shale oil cooperation

Western investor-owned oil companies and Rosneft, which is controlled by the Kremlin, need each other. These companies are in a constant struggle to find more oil and gas to replace what they produce and sell every day. Russia is one of the few countries in the world that harbor vast reserves of untapped hydrocarbons.

But much of Russia's remaining oil and gas is expensive and difficult to reach, found either in the harsh climate of Arctic seas or trapped in tight rock onshore. Western companies have the capital and the technical expertise to help Rosneft produce that oil and gas — and generate cash that helps the Russian government fund its operations.

Adnan Vatansever, a senior lecturer at the Russia Institute at King's College London, estimates that half of Russia's federal revenue comes from oil and gas sales.

Sechin has been president of Rosneft since the early 1990s. He is seen as the mastermind behind the 2003 takeover of the private oil company Yukos, whose founder, Mikhail Khodorkovsky, was jailed following disputes with the Kremlin. Rosneft seized Yukos' most valuable assets, making it Russia's largest company.


Targeting Sechin, a Putin confidante, is seen as a warning shot, signaling that the West could also go after Russia's biggest companies if Moscow doesn't help to resolve the crisis in Ukraine.

The fact that such sanctions might have an impact on Western interests gives them more heft, said Philip Hanson, associate fellow in the Russia and Eurasia program at the think tank Chatham House.
"Sanctions are a message," he said. "They are an instrument that are somewhere between pure diplomacy —talking — and warfare."

At the same time, Western governments also would prefer to avoid sacrificing important investments made by their own companies, or to disrupt oil and gas supplies in a way that would push energy prices higher around the world.
"The goal of these actions is not to punish energy companies, it's to get the Kremlin to think twice," says Molchanov.
Even sanctions against just Sechin complicate life for companies like BP. Because he's an American, BP CEO Bob Dudley may be barred from communicating with Sechin, raising practical questions about how they will continue to work together. For now, Dudley plans to continue to attend board meetings.
Exxon has signed agreements with Rosneft for "a series of multibillion-dollar exploration projects," the company says on its website. Molchanov wrote in a research note last week that Russia comprised 6 percent of Exxon's oil and natural gas production in 2013.

Sanctions and the Ukrainian crisis are already having an impact on foreign companies, if indirectly. Fears that sanctions will slow the Russian economy have caused the ruble to drop sharply in recent months, cutting the value of Russian earnings and assets.

BP's Andrew platform in the North Sea

BP said its earnings from its stake in Rosneft fell sharply in the first quarter because of the ruble's decline. Earnings from BP's stake in Rosneft fell to $271 million in the quarter ended March from $1.08 billion during the fourth quarter of last year.
Another effect of the sanctions is that foreign investors are delaying or pulling out of deals in Russia out of concern that further sanctions or turmoil will unravel them.

"The general effect of restricting the flow of international credit to Russia has had quite a chilling effect not just to Russia itself but in the companies that deal with them," said Chatham House's Hanson.
______

Fahey reported from New York.

Despite trying to present a united front, U.S. and Europe still diverge on Russia policies

The Washington Post: 30. April 2014
Despite trying to present a united front, U.S. and Europe still diverge on Russia policies



Former Germany's chancellor Gerhard Schroeder (4th R) speaks with Russia's President Vladimir Putin (C) and Nord Stream AG Managing Director Matthias Warnig (2nd L) at the entrance to the Yuspovsky Palace in Russia's second city of St. Petersburg, late on April 28, 2014

As the Obama administration and its European allies were toughening their sanctions against Russia this week, a somewhat different tone was being set in St. Petersburg, where Russian President Vladi­mir Putin was seen wrapping former German chancellor Gerhard Schröder in a bearhug.

A photo of the embrace — taken at a lavish 70th-birthday party for Schröder hosted by a subsidiary of the Russian gas monopoly Gazprom — made front pages across Europe on Tuesday and caused the government of Chancellor Angela Merkel no small amount of embarrassment.

Merkel’s government quickly distanced itself from Schröder, now a top official at a German-Russian company that operates a gas pipeline between the two countries. But the picture served to highlight the cozy relationship between the Kremlin and Germany’s energy interests — one that forms a major obstacle to President Obama’s efforts to present a solid, unified Western front in the face of Putin’s aggression in Ukraine.



The administration has been upfront about the reality that Europe has a lot more to lose from sanctions against Russia than does the United States.

At the moment, asset freezes have been imposed against Russian individuals and, in the U.S. case, also against certain businesses. If a decision is made to move toward what the Europeans call “Tier 3” measures against entire sectors of the Russian economy, a senior administration official said, it would be on the basis of a “shared commitment” in which “one nation isn’t bearing a significantly greater share of the burden as against other nations with different interests in different sectors.”

Sanctions against Russia’s massive energy sector, for example, would probably be most effective in getting Putin’s attention but would also disproportionately harm Germany, which relies on Russia for more than a third of its natural gas and oil supplies.

Britain is anxious about banking­-sector sanctions. France, whose defense industry is in the midst of completing a $1.6 billion ship contract with Russia, worries about defense sanctions. The Mediterranean countries are concerned about luxury goods and the Nordic countries about timber.

“That’s the challenge,” said one European diplomat. “How can they devise it so that the pain is distributed evenly?” Major companies in each capital are lobbying to ensure that their interests are not affected by the dispute over Ukraine.

Obama made numerous calls to allied leaders before and during the week-long Asia trip he completed Tuesday. But despite assurances from administration officials and public statements by European leaders that they are now on the same page, “things are not quite as clear-cut as ‘are we ready or are we not’ ” for sector sanctions, said the diplomat, speaking on the condition of anonymity about the sensitive negotiations.

“There has been a degree of disconnect between what you hear from some leaders and what is being said by their foreign ministers and officials in Brussels,” where European Union members have been in almost continual session on Ukraine.

Germany, Italy, Greece, Cyprus and others advocated holding back when foreign ministers met Monday to approve a new round of individual sanctions, diplomats from E.U. member countries said. Although Britain and others advocated matching the United States with new measures against Russian companies, those urging caution won the day, and the E.U. on Tuesday released a list of 15 more Russians and Ukrainians, for a total of 48, now subject to European asset freezes and travel bans.

Further discussions are scheduled for Wednesday to consider proposals to add specific companies and some of the people the administration calls Putin “cronies” who are already on the U.S. list.

Secretary of State John F. Kerry used a speech Tuesday to the Atlantic Council in Washington to urge the Europeans to step up sanctions and to increase their defense budgets. “This moment, without reaching for any hyperbole, because the moment is serious enough, is about more than just ourselves,” Kerry said. “The fact is that our entire model of global leadership is at stake.”

Beyond the question of how to distribute sector sanctions equitably among the allies is the question of what should trigger them. Opinions range from a continuation or escalation in Russia’s destabilizing actions in eastern Ukraine — what Obama on Monday somewhat vaguely called further “Russian aggression” — to only full-out military invasion.

“We’re not at the stage yet where we have to make a decision,” said a second European diplomat.

Yet the ongoing turmoil in eastern Ukraine, where pro-Russian militants Tuesday stormed the regional administration building in Luhansk while Ukrainian police stood and watched, has steadily eroded European reluctance.

Germany is considered essential to any attempt to pressure Moscow through sanctions. Merkel, who will meet with Obama in Washington this week, was originally reluctant to sign on to bolder steps against Russia.

But she now appears near a tipping point following the seizure in the eastern Ukrainian city of Slovyansk of European military monitors, four of them Germans. Officials in Berlin watched aghast as the men were paraded before cameras this week, an act that also seemed to cut through a strong undercurrent of sympathy for Russia running through the German public.

“The German bar [for tougher sanctions] is definitely higher than the American bar,” said Olaf Boehnke, head of the Berlin office of the European Council on Foreign Relations. “But this hostage case is really something that has the potential to make a difference.

“If they don’t see Putin using his influence on the separatists to calm this situation down,” Boehnke said, “you are getting closer to a German red line.”

Faiola reported from Berlin.

29 April 2014

Kerry: U.S. Taped Moscow’s Calls to Its Ukraine Spies

The Daily Beast: 29. April 2014
Kerry: U.S. Taped Moscow’s Calls to Its Ukraine Spies
By Josh Rogin

The secretary of state claimed in a private meeting that the U.S. intelligence community has recordings of pro-Russian forces being managed by government handlers in Moscow.

The United States has proof that the Russian government in Moscow is running a network of spies inside eastern Ukraine because the U.S. government has recordings of their conversations, Secretary of State John Kerry said in a closed-door meeting Friday.

“Intel is producing taped conversations of intelligence operatives taking their orders from Moscow and everybody can tell the difference in the accents, in the idioms, in the language. We know exactly who’s giving those orders, we know where they are coming from,” Kerry said at a private meeting of the Trilateral Commission in Washington. A recording of Kerry’s remarks was obtained by The Daily Beast.



Kerry didn’t name specific Russian officials implicated in the recordings. But he claimed that the intercepts provided proof of the Russians deliberately fomenting unrest in eastern Ukraine—and lying about it to U.S. officials and the public.
“It’s not an accident that you have some of the same people identified who were in Crimea and in Georgia and who are now in east Ukraine,” said Kerry. “This is insulting to everybody’s intelligence, let alone to our notions about how we ought to be behaving in the 21st century. It’s thuggism, it’s rogue state-ism. It’s the worst order of behavior.”

Representatives for the State Department and the Office of the Director of National Intelligence did not respond to requests for comment.

Kerry has asserted publicly before that Russian intelligence officers were the “catalyst” behind the riots and government building takeovers in eastern Ukraine. But on Friday he told the private audience why he—and the U.S. intelligence community—were so sure of this assessment. 

If U.S. intelligence agencies have intercepted proof of Russia’s destabilization operations, as Kerry claims, it means that the code-breakers and eavesdroppers in the National Security Agency and the broader American armed forces have overcome Russian efforts to hide their military communications. In March, the Wall Street Journal reported that U.S. agencies were surprised that it had not collected any telltale signs of the Crimea stealth invasion at the end of February, suggesting the Russians had managed to give such orders without the United States knowing about it. 

The intercepts also come as more proof has mounted inside Ukraine that Russia is behind the provocations, uprisings and other actions aimed at ripping the country apart. On Monday Ukraine's internal security service claimed they caught the self appointed separatist deputy mayor of Slavyansk with cash and encryption equipment on a return trip from Moscow. Last month, The Daily Beast reported the first signs of a Russian shadow invasion of Ukraine, noting Ukrainian arrests in eastern cities of people suspected of espionage.

The U.S. European Command relies primarily upon the RC-135 Rivet Joint to vacuum up electronic communications from Russia.

US Air Force RC-135 Rivet Joint

RC-135 Rivet Joint. Intelligence personnel collecting data from sensor gear on an Air Combat Command 55th Wing RC-135W Rivet Joint reconnaissance aircraft

These jets—variants of the Boeing 707 model—are equipped with advanced sensor and signal intercept packages. The other primary spy plane used by U.S. Navy to eavesdrop on such communications is the EP3, flown out off U.S. naval stations in Rota, Spain and Sigonella, Italy. The EP3 is the same spy plane grounded by the Chinese military at the beginning of the George W. Bush administration in 2001. 

The Russians are also listening in on the conversations of Ukrainian and Western officials. U.S. intelligence agencies believe that Russia has been behind a spate of such intercepted telephone conversations leaked out on the Internet and publicized by Russian state media. Traditionally the Russians use their own Beriev A-50 surveillance and early-warning aircraft to spy on the communications of its adversaries. 

AWACS Beriev A-50 of the Russian Air Force

Kerry previewed to the group of influential world leaders Monday’s announcement that the Obama administration is adding a group of Russian officials, businessmen, and institutions to its sanctions list. He gave new details about the administration’s planning of economic assaults on broad sections of the Russian economy that the U.S. would impose only if Vladimir Putin decides to launch an all-out invasion of eastern Ukraine.
“I’m not convinced he’s made the decision to cross the line with his troops because then it’s absolutely no question that its full force sector sanctions, energy, banking, finance, technology, arms, you name it, they are all on the table,” Kerry said. “We are trying to find a way to do sector sanctions so it is minimal negative impact on Europe and Canada and the U.S. but maximum impact on Russia. We believe there is a way to do sector sanctions with a scalpel, not a sledgehammer.”

Kerry said that he believes there is discord within the camp surrounding Putin and that Putin is now feeling pressure to relinquish his policy of aggressively interfering inside Ukraine.
“There’s a hardcore group around President Putin and the hardcore group… and they are pushing him forward, and then you’ve got a group of economic people that are urging caution,” said Kerry. ““Already I know that people close to him aren’t happy.”



Among those increasingly unhappy with Putin these days is the government of China, according to Kerry.
“The Chinese are very nervous about what Russia is doing. We have talked to the Chinese about it. There are obvious reasons that China is concerned about it,” he said.

The Europeans share some of the blame for exacerbating the tensions inside Ukraine late last year, according to Kerry’s version of events.
“Some folks in Europe made mistakes, the association agreement became too much of an East-West tug of war. It shouldn’t have been,” Kerry said.

Kerry expressed anger and despair at Russian Foreign Minister Sergei Lavrov. The Secretary of State accused his Russian counterpart of lying to him about Russia’s willingness to abide by an international agreement to de-escalate the Ukraine crisis.
“Right now there is not a negotiation; there is a confrontation. I’m sad to report I’ve never seen such a complete, miserable, unaccountable, disgraceful walk away from a set of promises and understandings than what has taken place,” Kerry said. ““I’ve had six conversations with Lavrov in the last weeks. The last one was kafta-esque, it was other planet, it was just bizarre. Nobody is better at telling you that red is blue and black is white… That’s what we are dealing with.”

EU adds 15 to sanctions list over Russia's actions in Ukraine

Reuters: 29. April 2014
EU adds 15 to sanctions list over Russia's actions in Ukraine


The European Union imposed asset freezes and visa bans on 15 more Russians and Ukrainians on Monday as part of expanded sanctions on Moscow over its actions in Ukraine.

The decision brings to 48 the number of people that the EU has put under sanctions for, it says, helping undermine Ukraine's territorial integrity.

The names of the 15 will not be made public until they are published in the EU's Official Journal on Tuesday.


EU diplomats said they would not include the heads of Russian energy giants such as Rosneft's Igor Sechin, who was included on a new U.S. sanctions list on Monday.

The EU decision coincided with a White House announcement that the United States was imposing sanctions against seven Russians and 17 companies linked to Russian President Vladimir Putin.

The United States has been much more aggressive in the penalties it has imposed on Russia than has the 28-nation European Union, which depends heavily on Russia for energy.

The EU has so far only put sanctions on individuals, not companies. EU ambassadors, meeting on Monday, discussed the need to broaden the legal basis to enable the bloc to put sanctions on companies, diplomats said.
The European Commission is drawing up a list of tougher economic sanctions, possibly affecting trade or the energy or finance sectors, that could be imposed on Russia.

The EU is split between countries in favor of stronger action, including Britain, France, Poland, Sweden, Denmark, the Czech Republic and the Baltic countries, and those who are reluctant, such as Italy, Greece, Cyprus, Bulgaria, Hungary, Luxembourg, Austria, Spain, Portugal and Malta.
"The main issue is to see how best to get a diplomatic resolution to the crisis, what is necessary to entice Russia to sit around the (negotiating) table. Sanctions are not an end in themselves," one diplomat said.


Europe and Russia have close economic ties, including billions of dollars in the trade of goods and investment,

Another diplomat said he believed the EU would eventually decide on tougher sanctions against Russia if the situation in Ukraine continued to deteriorate.
"I can't imagine that if the Americans act that the Europeans won't do anything," he said.

EU sanctions 15 Russian politicians and military leaders


The European Union said on Tuesday that it had imposed asset freezes and travel bans on 15 Russians, including a deputy prime minister, Dmitry Nikolayevich Kozak, and a deputy chairman of the State Duma, Ludmila Ivanovna Shvetsova.


Others on the list released on Tuesday include Valery Vasilevich Gerasimov, chief of staff of Russia's armed forces, as well as separatist leaders. 
The list released on April 29 includes Lieutenant General Igor Sergun, identified as head of the Russian military intelligence agency (GRU).

Pro-Russian separatist leaders in Crimea and the eastern Ukrainian cities of Luhansk and Donetsk are also on the list.

(Reporting By John O'Donnell; editing by Barbara Lewis)

Japan imposes visa bans on 23 people in new sanctions on Russia

Reuters: 29. April 2014
Japan imposes visa bans on 23 people in new sanctions on Russia

Japan's Prime Minister Shinzo Abe


Japan imposed visa bans on 23 people on Tuesday as it followed the United States and the European Union in announcing expanded sanctions against Russia over its actions in Ukraine.

Moscow has already denounced what it called "Cold War" tactics for the new U.S. and EU sanctions imposed on Russian and Ukrainian allies of Russian President Vladimir Putin.
"Japan expresses serious concern that Russian moves to violate Ukraine's sovereignty and territorial integrity, including the annexation of Crimea, are continuing," Japanese Foreign Minister Fumio Kishida said in a statement.

The Foreign Ministry did not disclose the names, titles or nationalities of the 23 people hit with the new visa bans. A ministry official said Japan's list was based on those compiled by the United States and the European Union.

The new U.S. sanctions, announced on Monday, target the likes of Putin's friend Igor Sechin, the head of oil giant Rosneft, with visa bans and asset freezes.

Prime Minister Shinzo Abe, who left Japan on Tuesday, faces a tough task during a 10-day European trip.

russian_japanese_economic_relations_original

He must strike a balance between standing by other G7 nations in condemning Russia, while also maintaining working ties with Moscow as Tokyo seeks to diversify energy imports after the 2011 Fukushima nuclear disaster.

Following Russia's recognition of the independence of Ukraine's Crimea region in March, Japan suspended talks with Russia on the relaxation of visa requirements and froze the launch of negotiations on a new investment pact. (Reporting by Kiyoshi Takenaka; Editing by Paul Tait)

28 April 2014

Obama Says More Sanctions Against Russia Are Coming

The New York Times: 28. April 2014
Obama Says More Sanctions Against Russia Are Coming



MANILA — President Obama, declaring that Russia was continuing to bully and threaten Ukraine, said here on Monday that the United States would impose additional sanctions on Russian individuals and entities, as well as freezing some exports of military technology.

The announcement, during a visit by Mr. Obama to the Philippines, was widely expected. Last week, the president said that the sanctions were “teed up” and were being delayed only by technical issues and the need to coordinate with the European Union.

The fact that the announcement was made on the last stop of Mr. Obama’s weeklong Asian trip underscored the sense of urgency about fears that Russia was destabilizing eastern Ukraine. The European Union is expected to announce similar measures within a day or so, as Mr. Obama and European leaders strive to keep a united front in their campaign of pressure on Moscow.
“These sanctions represent the next stage in a calibrated effort to change Russia’s behavior,” Mr. Obama said in a news conference with President Benigno S. Aquino III of the Philippines.

But Mr. Obama acknowledged, “We don’t yet know whether it is going to work,” and left the door open to more sweeping sanctions against Russian industries like banking and defense.

Mr. Obama did not specify the names of the Russian individuals or entities on the latest blacklist. The White House and the Treasury Department were scheduled to offer details later on Monday.

Among the individuals likely to be listed are Igor I. Sechin, the president of the state-owned Rosneft oil company, and Aleksei B. Miller, the head of the state-owned energy giant Gazprom, American officials said.

Administration officials have said the sanctions would target individuals with ties to President Vladimir V. Putin, though Mr. Obama insisted that they were not intended to punish him.

“The goal is not to go after Mr. Putin personally; the goal is to change his calculus, to encourage him to walk the walk, not just talk the talk” when it comes to diplomatic efforts to resolve the crisis, Mr. Obama said.

Mr. Obama said the sanctions would affect high-tech military exports to Russia, because they are not “appropriate to be transferred in the current environment.”

Mr. Obama and Mr. Aquino also promoted a new 10-year agreement between the United States and the Philippines that would give American warships and planes extended access to bases here.
“This is going to be a terrific opportunity for us to work with the Philippines, to make sure our navies, our air forces are coordinating,” Mr. Obama said.

U.S. President Barack Obama, left, speaks as Philippine President Benigno Aquino III looks on during a joint news conference at Malacanang Palace in Manila

The Philippines has been embroiled in a dispute with China over scattered islands in the South China Sea, and the return of a visible American military presence here will send a signal to the Chinese that the United States will resist Chinese expansionism.

Still, Mr. Obama said that the agreement was not meant to counter or contain China, and he added, “it’s inevitable that China is going to be a dominant power in this region, just by sheer size.”

On Monday, however, Mr. Obama’s focus was as much on Russia as on China. He reiterated that the Group of 7 countries were united in their approach toward Mr. Putin. But there has been a debate within the administration about whether the United States should impose more sweeping sanctions even if Europe is reluctant to follow suit because of economic concerns.

The issue came to a head in recent days as American and European leaders tried to coordinate this new round of sanctions after the collapse of a Geneva agreement to de-escalate the crisis in Ukraine.

Secretary of State John Kerry delivered a blistering public attack on Moscow on Thursday night for not living up to the agreement, but the plan to follow that up with sanctions on Friday fell apart while Washington waited for Brussels, postponing action until Monday at the earliest.


The deliberations in the West came as pro-Russian forces in Ukraine on Sunday continued to defy international demands to stand down. An antigovernment militia paraded eight detained members of a European military observer mission before cameras, while protesters seized a regional government television station and declared that they would use it to air Russian newscasts.

The display of the captive European observers underscored the challenge for Washington and Brussels in defusing the conflict. The observers, who were seized at a checkpoint on Friday, were led into an auditorium in the eastern city of Slovyansk by masked gunmen. The self-appointed mayor refused to discuss conditions under which they might be released, beyond mentioning a prisoner exchange, although one of the observers was later freed for health reasons.

Also on Sunday, a crowd of pro-Russia militants proclaimed the “Lugansk People’s Republic” in Lugansk, which lies east of Donetsk near the Russian border. Video posted on the website of the Ukrainian service of Radio Liberty showed two unidentified women declaring the republic and announcing that a referendum would be held on May 11 that would allow the region to join neighboring Russia. A crowd of about 200 people cheered.

Yelena Bugayets, the head of the press service for the Lugansk regional council, dismissed the idea that the militants had any sway in the city.

The militants occupied the local headquarters of Ukraine’s secret service on April 6, she said, and since then have held regular meetings in front of it. But their proclamations have no practical effect, she insisted in a telephone interview.

While some of Mr. Obama’s advisers want him to impose sanctions against whole sectors of the Russian economy, the president has decided against it for now, cognizant of the resistance of European nations that have far more at stake economically, officials said. During internal deliberations, Jacob J. Lew, the secretary of the Treasury, and other officials have argued for caution, maintaining that, while action is needed, more expansive measures without European support might hurt American business interests without having the desired impact on Russia, according to people informed about the discussion.

Mr. Obama has been particularly intent on not getting too far in front of Europe to avoid giving Mr. Putin a chance to drive a wedge in the international coalition that has condemned the Russian annexation of Crimea and actions to destabilize eastern Ukraine.
“The notion that for us to go forward with sectoral sanctions on our own without the Europeans would be the most effective deterrent to Mr. Putin, I think, is factually wrong,” Mr. Obama told reporters on Sunday in Malaysia. “We’re going to be in a stronger position to deter Mr. Putin when he sees that the world is unified.”
“For example,” he added, “say we’re not going to allow certain arms sales to Russia — just to take an example — but every European defense contractor backfills what we do, then it’s not very effective.”

Some officials, however, privately argue that the administration has made coordinating with Europe too high a priority and that effectively deferring to the 28-member European Union is a recipe for inaction. The United States, these officials contend, should move ahead with more decisive action on the theory that Europe wants leadership from Washington and historically joins in eventually.
“While imposing sanctions together with the E.U. would be nice, the U.S. simply has to lead and not waste more time trying to present a united approach,” said David J. Kramer, the president of Freedom House, an advocacy group, and a former Bush administration official. “It’s easier for us to do so than it is for the Europeans, and they will follow, as long as we lead.”

A task force of specialists on Russia that includes Mr. Kramer sent the White House a list of possible targets for sanctions, including Russian officials and business leaders as well as nine of its most significant companies.

Senator Bob Corker of Tennessee, the ranking Republican on the Foreign Relations Committee, made a similar proposal. “Hitting four of the largest banks there would send shock waves into the economy; hitting Gazprom would certainly send shock waves into the economy,” he said Sunday on “Face the Nation” on CBS.