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August 20, 2018 No.
7630

Russia This Week – August 20, 2018 – Part II

Russia This Week is a weekly review by the MEMRI Russian Media Studies Project, covering the latest Russia-related news and analysis from media in Russia, the Caucasus, Central Asia, and Eastern Europe.

Photo Of The Week


Russian President Vladimir Putin met with German Chancellor Angela Merkel on August 18, 2018. (Source: Kremlin.ru)

In The News:

Russia-Germany – Russian Spokesperson Peskov: Putin And Merkel Agreed That Nord Stream-2 Project Must Be Fulfilled


(Source: Kremlin.ru)

On August 18, Russian President Vladimir Putin met with German Chancellor Angela Merkel. The talks between the two leaders lasted three hours.

Kremlin Spokesperson Dmitry Peskov said that during the talks Putin and Merkel talked about the Nord Stream-2 pipeline project, which the U.S. opposes. The American Congress is mulling making the sanctions already passed on Russian energy products applicable to Nord Stream.[1]

"The purely commercial nature of this project and its competitive advantages were underlined… Both Putin and Merkel agreed that it would be absolutely wrong to somehow politicize this project. In general, there is understanding that this project is purely commercial, that it is profitable and competitive… That's why measures need to be taken to defend it from possible anti-competitive and unlawful attacks on behalf of third states, in order to fulfill this project, which is purely commercial and will be in everyone's interests… In general, the sides shared their understanding that the [Nord Stream-2] project must be fulfilled," Peskov said.

(Tass.com, August 19, 2018)

Read More:

  • The Deputy Chairman of the Russian Federation Council's Foreign Affairs Committee said that Russia is prepared for the possibility that Washington may impose new sanctions upon participants in the Nord Stream 2 pipeline project. (Sputniknews.com, August 19, 2018; read the full article)

US-Russia Economic War – Russian Expert: The Chinese Market Will Help Russia To Overcome The US Sanctions

Vyacheslav Kholodkov, expert of the Russian Institute for Strategic Studies (RISS), a think tank established by the Russian President stated that an economic war was declared against Russia.

"This was clear to many economists and politicians 4 years ago, along with the first sanctions from Washington. But some Russian ministries don't understand that our country is in a state of economic war now. In particular, a major part of Russia's gold and foreign exchange reserves (gold reserves), which is 370 billion dollars, is held in foreign currency and bonds, in dollars, and in first class banks, which include US banks. Are these assets of the Central Bank, which accumulate our gold reserves, protected?" Kholodkov stated.

The RISS expert said that transition to national currencies in trade can help to find a way out of a deadlocked situation. "We have been talking about the transition to such calculations for 9 years already. Our Central Bank agreed on 150 billion yuan swap line with the People's Bank of China in the autumn 2014, but only about 10% of bilateral trade is conducted in yuan and rubles. Why is transition to national currencies so slow? And another problem: the latest round of US sanctions will affect Russian banks and Russian debt. As a result, many banks may face the threat of being forced to reduce operations or having their accounts blocked. We have been working on the idea of issuing federal loan bonds denominated in yuan instead of dollars for a long time. This issue has been discussed since the last year," Kholodkov said.

"Russia has an alternative to the Western financial market. This is the huge Chinese market. First of all, the market of loans, bonds, and shares denominated in yuan. But we are not using this market fully," he concluded.

(Riss.ru, August 16, 2018)

See also MEMRI Special Dispatch No 7618, Russian Expert Kholodkov: We Will Not Succumb To Trump's Divide And Rule Tactics And Break With China, August 13, 2018.

Economic News – Putin's Aide Belousov: 'I Remind You Of The Main Capitalistic Law: You have To Share'


Putin's financial aide, Andrey Belousov. (Source: Expert.ru)

Andrey Belousov, Putin's financial aide, has drafted a proposal for the Russian President to "confiscate" windfall revenues from Russian petroleum and chemical corporations. According to the proposal the companies will have to pay to the state budget (additionally to regular taxes) a sum of approximately 855 billion US dollars. Belousov claims this is a fair measure because the companies accumulated these windfalls due to a low tax burden and improved world market conditions and not due to the skill of corporate leadership.

14 companies have the dubious distinction of finding themselves on Belousov's list.

(Vedomosti.ru, August 9, 2018)

The day after the proposal was publicized the share value of the 9 public companies (out of 14) plummeted by 5.9 billion US dollars.

(Vedomosti.ru, August 10, 2018)

After facing criticism from the companies' CEOs, Belousov said the measure was necessary for equalizing the tax burden and fulfilling the May presidential decree. He added "I want to remind you of the main capitalistic law: 'you have to share'."

(Kommersant.ru, August 10, 2018)

According to a letter sent to the Russian President Putin by Russian Union of Manufacturers and Entrepreneurs, the expropriation of windfall profits may lead to a capitalization loss of the companies, which is estimated at 50 billion US dollars, representing approximately 10 per cent of general market share.

(Vedomosti.ru, August 13, 2018)

Reactions To The New US Defense Budget

Russian FMA Spokesperson Zakharova: 'These Actions Are Driving Russian-US Relations Even Deeper Into An Impasse And Making Problematic The Very Chance Of Their Retaking A Constructive Path'

During her weekly briefing, Russian MFA spokesperson Maria Zakharova said about the new US defense budget:

"There have been masses of requests to comment on the new US defense budget. Some preliminary estimates were already offered and today I would like to dwell on this matter in more detail.

"Signed by the US president on August 13, the Fiscal 2019 National Defense Authorization Act has, in effect, consolidated Washington's policy to build up its international dominance by force. The unprecedented $716 billion defense check, a record of sorts covering the last 15 years, will have a destructive impact on the existing international security system.

"Characteristically, the document allocates funding for specific anti-Russia and anti-China projects mentioned in the US national security strategy and the US national defense strategy, as well as in the Nuclear Posture Review.

"These actions are driving Russian-US relations even deeper into an impasse and making problematic the very chance of their retaking a constructive path. In the practical sense, this Act (named after a rabid Russophobe, Sen. John McCain) extends a ban on military cooperation with Russia amid a serious surge of threats and challenges. The document approves $6.3 billion ($1.7 billion more than last year) in allocations for the European Reassurance Initiative to build up US military presence in Europe as well as to counteract the so-called 'Russian aggression.'

"The Act has other anti-Russian provisions, too, specifically a likely suspension of the US compliance with the INF Treaty under the pretext of its 'violation' by Russia. The US is going to 'retaliate' by continuing R&D on a ground-based missile banned under the INF Treaty and strengthening the European segment of the US global antimissile system, this in order to defend itself from Russian missiles that allegedly are at odds with the INF Treaty's constraints. Thereby they finally dispel all doubts as to the real target of the US antimissile defense. Referring to Russia's 'violation' of the Treaty on Open Skies, the Act introduces restrictions on cooperation under this document. The budget bans allocations for modernizing the long obsolescent fleet of aircraft performing flights under this Treaty, something that endangers security of both the US crews and Russian representatives on board.

"The Act confirms the course for unilateral and unrestricted development of the US global antimissile system. Among other things, funds have been allocated for the creation of its space segment, which is actually yet another step towards deploying weapons in outer space.

"Some other measures of counteraction to Russia and other 'aggressors' are plans to produce 'low-yield' nuclear warheads, something that leads to the lowering of the nuclear threshold and to greater risks of a nuclear war being unleashed, and hypersonic weapons to suit the 'prompt strike' concept.

"There is a separate entry on lethal weapons deliveries to the Poroshenko regime in Ukraine, a country that is actually in a state of civil war. This is certain to please those Ukrainian politicians who are not interested in an early settlement of the conflict in Donbass.

"For its part, Russia is taking and will continue to take the necessary measures for reliable protection of its own security by all means available – political, diplomatic and military."

(Mid.ru, August 15, 2018)

Read More:

  • Experts warn that the new US military budget aims to draw Russia, China and Iran into arms race. Editor-in-Chief of Russia's National Defense magazine Igor Korotchenko said: "This is really the largest US military budget backing the claims by the United States for global leadership… In particular, they need to impose a new spiral of the arms race on both Moscow and Beijing to drain their economic and financial systems." (Tass.com, August 14, 2018; read the full article)
  • Sergey Kislyak, Chairman of the Russian Federation Council's Committee for Foreign Affairs and Russia's former ambassador to the US, said that Russia must take into account an increase in military spending in the new Pentagon budget law for fiscal 2019, as this means the US will be updating its military systems. (Tass.com, August 14, 2018; read the full article)
  • Kislyak's reading of several provisions in that law informed him that they did not promote an arms control regime, but, to the contrary, the US was moving towards unilateral pressure. (Tass.com, August 14, 2018; read the full article)
  • Russian presidential spokesman Dmitry Peskov said that the Kremlin views the United States' attempts to portray Russia as a country posing a threat to the world as groundless, because the defense budgets of the two countries are incomparable. (Tass.com, August 14, 2018; read the full article)
  • The United States intends to continue implementing the multilateral Open Skies Treaty, a US Department of State official told TASS. (Tass.com, August 15, 2018; read the full article)

Human Rights In Russia

On August 15, approximately 500 protesters arrived at the High Constitutional Court Building in Moscow, as part of a "Mothers' March" in order to protest arrest of two teenagers, Anna Pavlikova and Maria Dubovi, under suspicion of creating and participating in an extremist group aiming to threat the political system of Russia.

According to the prosecution the girls coordinated a manifest of the organization and trained in firing firearms. According to the defense though, the whole case was set up by a FSB agent who provoked the girls to sign a manifest and arranged their training in firearms.

The girls were held in prison for the course of the trial for the last half a year, while the case is still being heard. Ahead of the march the organizers were warned by the police regarding the "consequences" of an officially unauthorized action, but the march went ahead nonetheless. The police did not intervene. Prior to the march, the investigating officer asked the court to alter prison custody to house arrest for the defendants.

(Novayagazeta.ru, August 15, 2018)


Parents holding toy animals protest imprisonment of teenage girls (Source: Novayagazeta.ru)

It's worth noting that the investigating officer had previously objected to altering custody terms.

(Meduza.io, August 15, 2018)

During the march, one of its organizers told the press that "our kids are taken hostages, anyone could be in the same place as the two girls."

(Snob.ru, August 16, 2018)

Earlier the mothers of two female defendants recorded a video-request to President Putin seeking his intervention in the case, but Dmitry Peskov, the presidential spokesperson, ruled out such intervention as " a trial is in progress, thus naturally the president can't intervene in any manner.:

(Novayagazeta.ru, August 10, 2018)

Read More:

  • Here are all the reported torture cases in Russia's prison system, so far this year. (Meduza.io, August 18, 2018; read the full article)

News In Brief:

  • Austrian FM Karin Kneissl's Wedding: WATCH Putin Dance, Congratulate Couple in German (Sputniknews.com, August 19, 2018; watch the video)
  • Photos of Putin at the Austrian FM's wedding (Mk.ru, August 18, 2018; see the photos)
 

[1] Foreignpolicy.com, July 19, 2018.