Is Russia’s Cheap Oil Nightmare Coming True?

Picture the scene. It is 2016, oil costs on average $35 per barrel, and Russia’s recession rolls into its second year. The economy shrinks by 2-3 percent. Unemployment creeps up, and wages continue to fall, depressing consumer spending. The ruble devalues, driving up inflation. To keep price rises in check, interest rates remain high, discouraging investment. The government drains its reserves, hoping that the oil price picks up before they run dry.

This was the nightmare scenario painted by Russia’s Central Bank in its December research paper. The bank, and Russia’s federal budget, is still planning for average oil prices of $50 per barrel next year and an end to the recession by early 2017. But with the global oil market oversupplied and prices falling well below $40 per barrel, the likelihood of the pessimistic scenario is rising, the bank warned.

If that happens, Russia could face the first sustained cutbacks in government spending and falls in individual wealth since Vladimir Putin rose to power 16 years ago.

“We must prepare for difficult times,” said Finance Minister Anton Siluanov, whose budget relies for around half its revenues on taxes from the oil and gas industry. As the Central Bank published its research, Siluanov said oil prices could fall below $30 per barrel at certain periods, according to the TASS news agency.

Even if oil drops only to $30, the ruble, which falls in line with crude prices, would weaken to around 80 to the U.S. dollar, said Chris Weafer, senior partner with Moscow-based consultancy Macro Advisory. That would be 10 percent weaker than in midDecember and a devaluation of around 60 percent from two years ago, making Russians far poorer in dollar terms.

Not ready to face a $30 average oil price next year, the Finance Ministry instead mapped out the effect of $40 oil on the 2016 budget. It said state revenues would fall by 1.6 trillion rubles ($23 billion), or 2 percent of the country’s economic output, while the deficit would grow from 3 percent to 5.2 percent of GDP, or just over 4 trillion rubles ($57 billion).

To cover the shortfall, the ministry said the 4 trillion rubles amassed from oil exports in Russia’s Reserve Fund would be almost entirely spent by the end of 2016, according to the Vedomosti newspaper, which obtained a copy of the report. The plan also proposed a 5 percent sequester on spending across swathes of government.

That means the state would do less to offset the higher inflation, lower wages and shrinking output predicted by the Central Bank. And if the Reserve Fund is exhausted before oil prices rebound, the government would be forced to make deeper savings, and the number of victims of the recession would rise.

Poverty is already increasing. The economy is set to shrink by 4 percent this year, and official data show that over September to January, 20.3 million Russians, or 14 percent of the population, was below the poverty line—2.3 million more than in the same period last year.

So far, this has not stopped Putin’s ratings from rising to record highs thanks to a wave of patriotism and Russian military action in Ukraine and Syria. But parliamentary elections are scheduled for next year, and a presidential vote is set for 2018.

Prolonged economic hardship would influence a “fundamental change in attitudes toward the state” and support for the government would fall, said Vladimir Milov, head of the Institute of Energy Policy think tank in Moscow.

Aware of the social risks, the government is likely to cut spending, first and foremost, on infrastructure and investment, Weafer said. But this would undercut the foundation of any economic recovery, and as a result “the economy will be weaker for longer,” he said.

From – http://www.themoscowtimes.com/business/article/billionaire-kovalchuks-national-media-group-to-buy-russian-cnn/business/article/is-russias-cheap-oil-nightmare-coming-true/553010.html

Ukraine’s massive shadow economy robs treasury and future of 44 million citizens


A soundproof steel vault is on the fifth floor of the government’s tax collection headquarters. This room is where former chief tax collector Oleksandr Klymenko allegedly hatched fraudulent schemes that deprived the state budget of $11 billion over three years, according to Ihor Bilous, a former head of the State Fiscal Service of Ukraine. This picture was taken on April 18, 2014, two months after Klymenko fled Ukraine by rushing past border guards at the Donetsk Airport in February 2014, after the EuroMaidan Revolution drove President Viktor Yanukovych from power. (Pavlo Podufalov)

A major challenge for the architects of Ukraine’s new tax system is how to uncloak about 40 to 60 percent of the economy that avoids government regulation, taxation or observation each year.

The Economy Ministry estimates that 42 percent of the nation’s economy, or about $18 billion, was unaccounted for in the first six months of this year. In fact, since 2008, an average of 44.5 percent of the nation’s gross domestic product has gone unregistered, according to Friedrich Schneider, an economics professor at the Johannes Kepler University in Austria who has studied the phenomenon for more than a decade.

This equals $328 billion that will have escaped official detection in 2011-2015, when using GDP figures provided by Kyiv-based investment bank Dragon Capital. In his research, Schneider defines the shadow economy as “all market-based legal production of goods and services that are deliberately concealed from public authorities.”

Tetyana Tyshchuk of the Institute for Economics and Forecasting at the Ukrainian National Academy of Science, in her research, said that “white” and “shadow” economies “don’t exist as two parallel realities.”

For example, an employee may receive a portion of their salary legally and the rest in an envelope that avoids payroll taxes and pension fund deductions. Either way, the money gets spent on items that get taxed.

“The list of these chains, which consist of white and gray operations, may go and on,” Tyshchuk said.

Another factor of which policy makers should take notice, according to Schneider, is that certain aspects of Ukraine’s shadow economy are“welfare enhancing” for the economy.

“Underground production is a vital branch of the overall economy. A shadow economy produces added-value goods and services, which are as good as officially produced ones,” Schneider told the Kyiv Post. “What’s bad is that social security and the pension fund loses, but the man on the street benefits, many have second jobs in the informal sector like driving a taxi or selling homegrown produce.”

When measuring the value of goods and services produced in an industry, the raw materials or resource extraction industry remains the most concealed from government regulation, taxation or observation. These segments are “highly monopolized,” according to a report on the shadow economy published in December by the Economy Ministry. Source: Ministry of Economic Development and Trade of Ukraine

Businesses engaged in transactions involving foreign currency sometimes enter the shadow economy to avoid risks.

On a larger scale, undeclared work and illicit financial flows remain the principal problems. They include tax invasion, capital flight, money laundering, and misuse of budget revenues, according to the Kyiv-based International Center for Policy Studies.

Tyshchuk said the “most dangerous one is the shadow economy in the government sector…it is based on corruption and destroys our economy.”

For Natalia Osadcha, partner at Syutkin & Partners, the “non-transparent system of taxation and high tax rates are the root of all evil.”

Ukraine lost over $116 billion in 2004-2013 in “illicit cash flows,” averaging $11.6 billion a year, according to a December report by Global Financial Integrity, a non-profit group in Washington, D.C. that analyzes the movement of money. Some $1.1 billion of this was “hot” money, “essentially cash that has disappeared from the economy” that wasn’t registered with the central bank or another regulatory agency, according to Global Financial Integrity.

But more than 90 percent of the dirty money was due to what the group calls “misinvoicing,” when the value or volume of an export or import is misstated on an invoice. Weak customs enforcement and tools, combined with graft allows “criminals, corrupt government officials, and commercial tax evaders to shift vast amounts of money across international borders quickly, easily, and nearly always undetected,” the Global Financial Integrity reported stated.

Fraudulent value-added tax refund schemes also fall into this category.

“The same with VAT, it is illogical corrupted tax, the company pays it, and then tries to get it back for five years, what’s the point, no one knows; the word ‘corruption’ comes to mind,” Osadcha said.

Serhiy Kurchenko, widely believed to be a front man for ex-President Viktor Yanukovych, is accused of using similar fraudulent manipulation of invoices in the liquefied natural gas business, robbing state coffers of $2.2 billion. He has denied the allegations, describing himself as an “honest businessman.”

The continued opacity of the global financial system makes it easier to shift stolen assets on the receiving end. “The opacity reveals itself in many well-known ways: tax havens and secrecy jurisdictions, anonymous trusts and shell companies, bribery, and corruption,” according to Global Financial Integrity.

At the country of origin of illicit funds, “customs agencies should treat trade transactions involving a tax haven with the highest level of scrutiny,” reads the American report. “Governments should significantly boost their customs enforcement by equipping and training officers to better detect intentional misinvoicing of trade transactions, particularly through access to real-time world market pricing information at a detailed commodity level.”

Tax authorities in Ukraine estimated last year that cash payments for salaries total about $17 billion a year tax, with at least two million workers not appearing on any tax rolls. Moreover, “another five million report earning salaries that are below the minimum wage, which authorities say is a sign they are paid partly in cash,” according to Reuters.

Authorities are on to the problem.

The Kyiv Post counted 15 large-scale busts of money laundering centers this year by the Security Service of Ukraine, totaling $160 million. About half were allegedly used to finance Russian-backed separatists in eastern Ukraine.

State Fiscal Service chief Roman Nasirov said at a Nov. 12 briefing in Kyiv that 50 conversion centers were eliminated this year without providing financial figures. In addition, thanks to the government’s electronic administration of value-added tax, some $8 million each month is detected and registered that otherwise would have remained hidden.

There’s also a correlation between which industries are most in the shadows and the extent to which they are regulated, said Tatiana Ignatenko and Rodion Teslia of the Poberezhnyuk & Partners law firm.

“For example, in the retail sector, the rank of the shadow economy is 60 percent, the pharmaceutical industry is 40 percent in the shadow…It is worth noting that the aforementioned industries are considered to be the most over-regulated sectors of business in Ukraine,” the two lawyers wrote in comments to the Kyiv Post.

Twenty-five companies paid more than Hr 100 billion to state coffers in 2014. Some have even paid more in the first six months of this year than all of 2014, including state-owned energy giant Naftogaz Ukraine. Source: Ekonomichna Pravda

Solutions

What governments like Ukraine can capture quickly is illegal trade, according to Global Financial Integrity: “Curtailing even a small portion of these illicit flows would have a catalytic impact on a government’s ability to address the needs of its most vulnerable people.”

Perhaps the trickiest part is what economists call “tax morale” – or more precisely, the lack of it in Ukraine.

“Taxpayers are more heavily inclined to pay their taxes honestly if they get valuable public services in exchange,” Schneider said.

Ukraine’s government officials have historically shown they are not putting taxpayers’ money to good use. Until they do, much of Ukraine’s economy will remain in the shadows where tax evasion flourishes.

Who runs Russia with Putin?

When Vladimir Putin first came to power, he was asked in an interview which of his colleagues he trusted most.
He named five people:

Nikolai Patrushev

Sergei Ivanov

Dmitry Medvedev

Alexei Kudrin

Igor Sechin

Fifteen years later, these men still form President Putin’s core group and dominate the strategic heights of Russian government and big business:

Mr Patrushev was director of the FSB internal security service from 1999 until his appointment as Secretary of the Russian security council in 2008

Mr Ivanov has been Defence Minister and Deputy Prime Minister. Since 2011, he has been head of the presidential administration

Mr Medvedev was President from 2008-12, forming part of the ruling “tandem” with Mr Putin, and is now Prime Minister

Mr Kudrin, Finance Minister until 2011, no longer holds a formal position but still appears to offer advice to the president on financial and economic matters

Mr Sechin, who has held senior positions in the presidential administration and government, is chief executive of Rosneft, the state oil company

This core group illustrates two important points about who runs Russia.

First, there has been continuity in terms of the personnel closest to Mr Putin. Real reshuffles are rare, and very few have been evicted from this core group.

Second, the heart of the leadership team is made up of allies who served with Mr Putin in the KGB, in 1990s St Petersburg, or both.

This core group also includes others whom the president trusts to implement major infrastructure projects, such as Arkady Rotenberg, one of those responsible for the Sochi Winter Olympics, as well as several regional figures and senior bureaucrats.

Many of these figures held senior positions even before Mr Putin’s rise to power.

Defence Minister Sergei Shoigu, formerly Minister of Emergency Situations, was a prominent party political figure in the second half of the 1990s and leader of the United Russia party from 2001-05.

Such figures convene in the security council, one of the most important organisations for co-ordinating high-level decision-making and resources.
At the same time, the Russian administrative system – the so-called vertical of power – does not function well: policy instructions are often implemented tardily and sometimes not at all, so others have important roles helping develop and implement projects.

One such individual is Yuri Trutnev, elected as a regional governor in 2000, and then appointed Minister for Natural Resources and Ecology in 2004.
In 2013, he was promoted to Deputy Prime Minister and Presidential Plenipotentiary to the Russian Far Eastern Federal District, a high priority post for Mr Putin.

Russian observers also point to the role played by Vyacheslav Volodin in helping Mr Putin run Russian politics since 2011.

Mr Volodin rose through regional and then national party politics, before being appointed to government positions.

He established the influential All-Russian Popular Front in 2011, which makes an increasingly significant contribution to formulation, implementation and monitoring of the leadership’s policies.

Mr Volodin was subsequently appointed First Deputy Head of the presidential administration, responsible for overseeing a “reset” of Russian domestic politics since 2012.
Alongside continuity in the core leadership team, there has been a growing need for effective managers to implement its policies.
Indeed, rather than shrinking, as some commentators have suggested, the leadership team appears to be expanding.

There are several rising stars who play increasingly important roles in party politics and administration.

One is 39-year-old Alexander Galushka, who is a member of the Popular Front and many of the president’s and prime minister’s advisory committees.
He was appointed Minister of the Far Eastern region in 2013.

This leads us to the final point about who runs Russia with Mr Putin – while the President is the central figure, he is part of a team, which itself is part of a system, and therefore highlights the importance of effectiveness in implementing tasks.

All the individuals have reputations for hard work, loyalty and proven effectiveness in completing difficult tasks in business, state administration and politics.
As one Russian close to Mr Putin has observed, he did not choose them for their pretty eyes, but because they get things done.

From – http://www.bbc.com/news/world-europe-34866597

Donbas on its way to becoming Chechnya of 1998, Babchenko says

However much some in Russia, the West, or even in Ukraine may hope that the Donbas will become “a frozen conflict,” that is not going to happen, according to Russian military journalist Arkady Babchenko. Instead, the facts on the ground point to it becoming a Chechnya of 1998 unless and until Ukrainian forces restore order there.

In an interview with Apostrophe’s Artem Dekhtyarenko posted online today, Babchenko says that there is no basis for thinking that any accords will transform the situation into “a frozen conflict” with “some kind of quasi-state like a second Transdniestria.”

That is “because the Donbas is a territory which is controlled by separate armed groups,” a situation that recalls Chechnya and other parts of the North Caucasus at the end of the 1990s. And as was the case then, “there will be war, banditism and kidnappings” in the Donbas for the foreseeable future.

“There are no other variants in this region,” Babchenkok says. That horrific situation will end only when Ukraine uses its military to restore Kyiv’s control over the region. No political resolution is possible, the military analyst argues, and consequently, “the only way out is via the use of force.”

It is of course possible that a larger war could return, he continues, but he suggests that this is not “a highly probable scenario.” “As long as Vladimir Vladimirovich Putin is in power in Russia, the Russian Federation will always be involved in a war. Only the theater of military operations will change,” just as it has now shifted from Ukraine to Syria.

“But if Syria will not fulfill those domestic political tasks which [the Kremlin] has placed on it, then the theater of military action could shift back to the Donbas.” Those tasks are two:

Distracting attention from Putin’s failures, from thinking that “the tsar is bad,”

And providing Russians with a new enemy to blame for their own economic and societal problems.

At the same time, Babchenko says, were Putin to be replaced just now, that “would mean the complete loss in Russia of state power and control,” a development that would leave the Donbas in a state of anarchy. His departure would mean that Moscow would have no control there and require Kyiv to intervene to restore order.

For the time being, he adds, “Putin doesn’t need a major war on the territory of Ukraine,” and without Moscow’s support, those anti-Ukrainian elements in the Donbas are not capable of launching one. Consequently, the war there will continue at a low level of intensity with various people proclaiming falsely an armistice again and again.

Those fighting against Ukraine in the Donbas “do not have any final goal and cannot have one,” Babchenko explains. “These are people with arms who live in the here and now while pursuing, as their only goals, killing ‘Banderites’ and engaging in marauder actions.” They don’t have any bigger goals than that.

And those who think that Russia doesn’t have the resources to support this kind of conflict are deluding themselves. Moscow has sufficient military equipment left over from Soviet times to continue such a conflict in eastern Ukraine “over the course of decades,” an unpleasant reality but a reality nonetheless, Babchenko concludes.

From – http://euromaidanpress.com/2015/12/27/donbas-on-its-way-to-becoming-second-chechnya-babchenko-says/

The End Of Russia’s Mass Hallucination

Fresh barbed-wire fencing around the nation’s main TV tower isn’t exactly a sign of a confident regime.

In addition to reinforcing its perimeter, Moscow’s state-run Ostankino television center also upgraded its security detail, replacing regular police officers with elite Interior Ministry forces.

“These are normal security measures that are connected to the alarming situation in Moscow, in Russia, and in the world,” Denis Nazarov, a spokesman for Ostankino, told Novaya Gazeta.

Beefing up security at Ostankino — the epicenter of the Kremlin’s propaganda machine — is just one sign that the Kremlin is getting increasingly concerned about civic unrest as 2015 draws to a close.

Russia’s security services have also increased their stocks of crowd-control weapons — including grenade launchers — fivefold.

The State Duma, meanwhile, has passed legislation allowing the Federal Security Service to fire its weapons into crowds and lawmakers are considering a bill that would make discrediting the Russian Federation a federal crime.

But wait a minute! Why all this paranoia? Isn’t this regime wildly popular? Isn’t Vladimir Putin’s popularity close to 90 percent?

Well, yes. But the Kremlin understands all too well that the sky-high public support is largely based on a collective hallucination — a euphoric patriotic purple haze resulting from the annexation of Crimea and the illusion that Russia is again a superpower.

And they understand that once everybody comes down from this television-induced acid trip and hungover Russians have a clear view of their new reality, there’s gonna be hell to pay.

“To ordinary people, the fruit of Putin’s foreign policy is bitter,” political commentator Leonid Bershidsky wrote in Bloomberg View.

“All that Russians have gotten from Putin’s international activity is a boost to their pride, delivered by the Kremlin’s propaganda channels — not a tangible benefit as the economy continues to buckle under the weight of falling commodity prices.”

Television, The Drug Of The Nation

Over the last year, inflation has soared, real incomes have plummeted, and purchasing power has evaporated. With oil prices at historic lows with no recovery in sight and Western sanctions remaining in place, there is little chance things will get better soon.

And if television is the drug of the nation, it may finally be losing its potency.

According to a new poll by the independent Levada Center, Russians’ trust in the TV news has declined precipitously, from 79 percent back in 2009 to just 41 percent today.

Likewise, a recent report by the Russian Academy of Sciences Institute of Sociology concluded that although three-quarters of Russians still blame the West for their economic woes, the Kremlin has a window of approximately one year to 18 months before they begin to blame their own rulers.

From the recent nationwide truckers protest to striking doctors and teachers in Siberia, the signs are increasing that the scales are indeed beginning to fall from people’s eyes.

Mindful of the risk, Putin has reportedly tasked the Federal Guard Service, the Kremlin’s Praetorian Guard, to spearhead a task force to monitor the potential for labor uprisings in Russia’s far-flung provinces.

They even have a color-coded scheme that classifies regions as green, yellow, or red depending on the risk of civil unrest.

Stockholm Syndrome

In addition to fears of civic unrest, there are also signs that the business elite is getting increasingly restless.

Speaking at the Moscow Economic Forum, Dmitry Potapenko, a partner at the Management Development Group who runs a chain of supermarkets, shocked the audience by laying into the authorities.

It’s not Western sanctions but the actions of Russia’s rulers that are damaging its economy, he said. “It’s not Barack Obama who’s responsible for our prohibitively high interest rates.”

A video of his rant attracted more than 1.6 million views on YouTube.

“There is obvious fear among the elite,” Valery Solovei, a professor at the elite Moscow State Institute of International Relations, told Obzor.press.

“There are growing concerns about the future. All this is due to the unpredictability and irrationality of the president’s actions. But at the same time, the elite feels hostage to the president. It’s a typical case of Stockholm Syndrome.”

If 2014 was the year Moscow went rogue, then 2015 can be described as the year that the costs of that course became manifest for Russians.

And next year should be when we learn whether Vladimir Putin’s regime will be able to bear those costs — and what lengths he will go to should they become prohibitive.

“Putin faces a harsh dilemma. He could try to make Russia more competitive by carefully retreating in Ukraine, getting Western sanctions lifted, and liberalizing the domestic economic climate. That would mean dismantling the backbone of his regime,” Bershidsky wrote.

“Or Putin could drop the remaining pretense of democracy and rule openly by force, ordering mass reprisals against opponents both real and imagined. The system Putin has created is pushing him toward the second option.”

The barbed wire around Ostankino is symbolic — and it is probably just the beginning.

From – http://www.rferl.org/content/the-end-of-russias-mass-hallucination/27444789.html

Ukrainian separatists launch offensive around Mariupol

After having taken on Wednesday the village of Kominternove, in the vicinity of the Black Sea port of Mariupol, Russian-backed separatist forces in Ukraine have today occupied the village of Vodyane, appearing poised to grab more land and encroaching on Mariupol.

Mariupol sits along a strategic coastal route linking Russia and separatist-controlled parts of eastern Ukraine with Crimea, which was illegally annexed by Russia in March 2014.

Ukrainian officials and Russian-backed separatists accused each other of violating a holiday cease-fire on December 23, just hours after the truce came into effect in Ukraine’s conflict-torn east.
Army spokesman Andriy Lysenko said “illegal armed groups have already violated these agreements.”

“Since the beginning of the day we recorded seven enemy shellings of our positions,” Lysenko told journalists.

Separatist authorities rejected the claims and accused Ukrainian forces of “continuing to shell” their territory with mortars and also of using small arms against them.

The two sides had agreed on December 22 to halt all fire and maneuvers starting from midnight to last through the Christmas and New Year’s holidays.

Martin Sajdik, the head envoy from the Organization for Security and Cooperation in Europe (OSCE), said the two sides had also agreed to limit their troop and tank movements along the frontline.

Most Orthodox Christians in Ukraine and Russia celebrate Christmas on January 7.

From – http://neurope.eu/article/ukrainian-separatists-launch-offensive-around-mariupol/

Russian proxy fighters occupy strategic village on approaches to Mariupol

Fighters from one of the Russian-backed armed groups that have seized control of parts of Ukraine’s Donetsk Oblast have occupied a strategic village near Mariupol, Ukraine’s military said on Dec. 22.

A group of about 100 fighters entered the village of Kominternovo, which straddles one of the main roads leading into Mariupol from the east, on the morning of Dec. 22, Ukrainian military spokesman Anton Myronovych told Ukrainian television’s 112 Ukraina channel.

“According to our information, (the fighters) have armored vehicles, possibly even tanks and other weapons, which is prohibited by the Minsk (peace) agreements,” Myronovych said.

He described the occupation of the village as a “large-scale provocation,” and said the armed forces had reported the move to the Organization for Security and Cooperation in Europe – the organization that is supposed to be policing a ceasefire regime and a zone free of heavy weapons agreed under the Minsk peace deal.

“In this way they want to provoke us into taking retaliatory action, perhaps by liberating the settlement with the use of heavy weapons,” Myronovych said.

From Kominternovo, the city of Mariupol would be within the range of 120 mm mortar shells, he said.

Alexander Zakharchenko, the leader of several Russian-backed armed groups that have seized control in part of Ukraine’s Donetsk Oblast, has said several times that his fighters intend to take control of the key southern port city of Mariupol, and even extend the area they control to the borders of the whole of Donetsk Oblast.

Russian-backed armed groups have been in control of about a third of the area of Donetsk Oblast since September 2014, when a peace deal between the groups and the Ukrainian armed forces was agreed in the Belarusian capital Minsk.

The agreement included a ceasefire and withdrawal of weapons from the front line between the two sides, but neither condition has ever been fully respected.

After a flare up of fighting at the end of 2014 and in early 2015, the sides met in Minsk again to agree on a way to fulfill the previously agreed peace deal.

However, on Feb. 18, 2015, just days after the signing of that “Minsk II” agreement on Feb. 12, the Russian-backed armed groups, allegedly with the aid of Russian regular troops, launched an offensive to take the key strategic town of Debaltseve. The town had been under the control of Ukrainian forces at the time a Feb. 15 ceasefire agreed in Minsk was supposed to have come into effect.

The Ukrainian military has reported a sharp uptick in the number of attacks made on Ukrainian positions in the Donbas conflict zone in recent weeks. It said 39 attacks were made on Dec. 21, and in prior days the number has exceeded 50 per day – figures comparable to those seen during the period of increased hostilities that flared up in the Donbas this summer.

IMF Says Russia Right About Ukraine $3 Billion Loan

Russia apparently is not always blowing smoke. Sometimes they’re actually telling it like it is.

The International Monetary Fund said on Wednesday that the $3 billion Russia loaned to Ukraine in 2013 was indeed an intergovernmental loan and not a private one as Kyiv contests. The Ukrainian government argued that Russia’s loan came from their National Wealth Fund and not directly from the Russian government and should therefore not be part of the IMF rules that require Ukraine to make good on sovereign debts as part of its bailout package.

The IMF agreed with the Russian government today, stating that Russia could not loan the money directly from the Russian budget because it was not allocated to do so at the time. Back in 2013, the Russia friendly Viktor Yanukovych was in power. He was ousted through extra legal means in the Euromaidan protests in February of 2014 and replaced by Washington’s handpicked successor Arseniy “Yats” Yatsenyuk. The IMF said that the money from the Russian sovereign wealth fund constituted government funds and was therefore a sovereign credit, as the Russian government declared.

Moreover, the Russian government confirmed to Euroclear, at the request of the Ukrainian authorities at the time, that the Eurobond was fully owned by the Russian government. The IMF said in a statement that the Eurobond was ”an official claim” by the Russian government and fit the purposes of the IMF policy of debt in arrears to official creditors. The Eurobond is held by the Russian sovereign wealth fund, an agency acting on behalf of the Russian government and the money originates from a transaction where the fund acted on behalf of the Russian government to provide financing to Ukraine. The decision by the IMF today puts further funds in jeopardy, unless Kyiv can agree to a refinance deal, or pay the debt in full.

From revolution to undeclared war: Ukraine’s parallel universes in Kyiv and Donetsk

There is a border between Ukrainian soldiers and pro-Russian militants, dividing the Ukrainian soil into two parts. While some Ukrainians from Kyiv have started to build a new community after the pro-EU protest, there are foreign students trapped in the self-acclaimed “Donetsk People’s Republic” (DNR) and families fleeing from their motherland Donetsk to Kramatorsk, another city in Donbas region.

When Donetsk remains a hometown
Abdullah Rafid and Sahen Jebodh are two out of five students who are still studying at Donetsk National Medical University for a dentistry major in spite of the ongoing war. They are classmates who can’t go to either the Ukrainian or Russian side.

“There were several blackouts in Donetsk but no one cares. The Ukrainian government even cancelled our visa,” said Rafid, an Iraqi who has been studying for 4 years in Donetsk. “I like this city because it has better education than rest of Ukraine. Although my home (Iraq) will not accept the diploma issued by Donetsk, I will show what I’ve learnt. I will take action,” Rafid continued.

The university was offering more than education during the war, according to Mauritian student Jebodh. “The school was supportive during the war. We were depressed but the school gave us hope in the midst of shelling and bombing,” he added.

“People from Donetsk didn’t care about foreigners before the war started. They were ignorant but now they start to appreciate foreign students who are staying,” he said.

As a foreigner, the 24-year-old Mauritian still feels the ignorance of Donetsk people because of the “former Soviet barrier.” But his classmate has a closer bonding to the locals.

Rafid said that he felt the respect from Russian people as he decided to stay with the locals during the war. “They consider me as part of the family, even though they are living in a church. The mother of that Russian family even said that I’m her son.”

While the foreigners are staying for studies, some locals decided to leave.

“I don’t want my son to see the war,” said Dmitriy Korniychuk, one of the displaced Donetsk natives living in Kramatorsk. He was a cable worker in Donetsk but decided to quit his job later due to the war. “My family moved to Kramatorsk for more than one year since the start of the war. I moved in few months ago because I want to unite with my family,” he said.

But the case of Korniychuk is only the tip of an iceberg. With more than one million of Ukrainians who are forced to flee from their hometowns, there are over half of the displaced civilians coming from Donetsk and Luhansk oblasts.

“I want to see my family including my parents,” the Donetsk native said. “But my father is too old and ill to move out, so I have to come back from Kramatorsk to Donetsk regularly,” he continued. “Getting a “propusk” is difficult now.”

A “propusk” card is a document granting people to have a special permit to travel between Anti-Terrorist Operation(ATO) zones from the Ukrainian side and Donetsk’s “border” controlled by pro-Russian militants. Not only do people line up at different checkpoints for up to a day, but they also have to cross the border before it starts snowing.

When the revolution still matters
“I want something more than a Molotov cocktail–a revolutionary development of education,” a 19-year-old protester Ivona Kostyna said. Kostyna didn’t attend a university as EuroMaidan started after graduating from high school, but her revision drives her to go further in Anti-terrorist operation (ATO) zones and get through most of the hotspots in Eastern Ukraine.

“There weren’t many resources for the Ukrainian army as the former government was ousted,” Kostyna said. So she decided to bring a hamlet and bullet-proof vest to go to the battleground and send Ukrainian soldiers water and food. It was before the first anniversary of the start of EuroMaidan.

Even after 2 years of EuroMaidan, the revolution still matters to Ukrainian journalist Kateryna Gladka as she still remembers hundreds of protesters who sacrificed in the tragic event. “I remembered people were brave and they saved each other. I still fell the responsibility all the time,” she said.

“We need evolution, not revolution,” Gladka said. “You can’t sit in a chair and wait for nothing,” Gladka continued. “So I started some cultural projects to make videos about portraits of Ukrainian artists.”

Kateryna Gladka was the first batch of protesters who started to demonstrate against then president Viktor Yanukovych.

“This revolution is our revolution. We were dubbed as the “generation of independence” since we are the first generation of Ukraine who grew up after its independence,” she said.

The 1996-born protester Ivona Kostyna stood up for a different cause, though. She was a volunteer who made a kitchen to provide food for the protesters. “I was thinking if I’m not standing up today, I won’t feel safe in the future.”

The roles of Gladka and Kostyna were different while taking part in the protest, but their thoughts somehow lead them to a similar path–they don’t want another revolution.

The future of the divided territory
“Most of us worry about our safety–how our government would deal with the safety issues,” Ukrainian journalist Gladka said. “After the revolution, there are young people working in the parliament but they have a wide gap with the older lawmakers who were raised in the former Soviet Union–the older generation is communist-minded.”

“I’m getting out of here sooner or later. I will graduate from the medical school in 6 months,” the Donetsk-based dentistry student Jebodh said. His tone remained low-key, as well as the way he described this Russian-controlled city. “I don’t expect much help from Ukraine. Too much cloud. No hope.”

From – http://euromaidanpress.com/2015/12/18/from-revolution-to-undeclared-war-parallel-universes-in-ukraine/

Russia avoids revolution again

Naysayers are keen to predict Russia’s demise, but despite a difficult year politically and economically, the country has failed to fall apart.

For at least the past decade, every year some expert inside or outside of Russia has predicted that the country will erupt in revolution, or at least that it is ripe for “regime change.” Numerous books and articles are published annually specializing in forecasts of imminent doom for the Kremlin.

Starting in 2014 analysts began to look for signs of this revolution in the country’s economic troubles. Last year, British Prime Minister, David Cameron, spoke of “turn(ing) the ratchet” on Vladimir Putin and suggested that Western sanctions would “permanently” damage Russia’s financial health.

This trend only continued in 2015. In January, U.S. President Barack Obama declared the Russian economy “in tatters” and in September, CNN reported that Russia’s economy was “failing.” Just this month, opposition figure Mikhail Khodorkovsky warned that a revolution is “inevitable” in Russia.

However, despite the warnings, the country somehow manages to go on.

What revolution?

In 2015, there were numerous potential triggers for a political breakdown. The murder of prominent opposition voice Boris Nemtsov in central Moscow in February was one. It produced prevailing sadness at the horrible end of this public figure, but little else.

Another flashpoint could have been this winter’s protests by long-haul truckers, which have threatened to block major roads across the country. But so far their displeasure has remained confined to a small disruption of traffic on Moscow’s ring road and a very calm meeting with police.

The blackout of Crimea might have sparked restlessness on the peninsula, which Russia absorbed last year, but there was hardly a peep of vitriol against Moscow.

The publication of documents by newspaper Novaya Gazeta and opposition activist Alexei Navalny accusing Prosecutor General Yuri Chaika’s family of being involved in deep-seated corruption could have caused some rage. Chaika’s son has been linked to the mafia and reportedly owns expensive homes in Switzerland and Greece. The general public, however, seems to accept official reassurances that Chaika himself is not involved in any illegal acts and the investigation is the product of dirty political intrigues.

Then there is the currency crisis. Last year, a dollar was worth around 35 rubles; now it’s around 70. Many Russians have lost much of their savings. Opportunities to travel abroad have been snatched away and imported goods have more or less doubled in price. Inflation stands at around 19 percent and 6 million people are expected to fall out of the middle class, which has been the mainstay of Putin’s personal popularity; the number of Russians living below the poverty line has risen to 14 percent.

A different reality

And yet none of these issues has provoked comprehensive protests or popular resistance to the government. Instead, recent opinon poll data from the analytical Levada Center shows that, rather than hurtling into disarray, Russia is actually pretty stable. More than 80 percent of Russians believe that Russian citizenship is preferable to any other, and two-thirds consider themselves “free’.” Fifty-seven percent hope to see Putin re-elected to another presidential term in 2018.

The reasons for such calm are pretty elementary. Firstly, the mixed results of Ukraine’s revolution and the dramatic collapse in living standards there has spooked Russians. They genuinely fear that violent upheaval could lead to a repeat of the chaos of the 1990s.

Another problem is the weakness of the liberal opposition. Sure, the Kremlin makes life tough for its opponents. State TV doesn’t acknowledge them to a great extent and official newspapers largely ignore them. However, the Internet is open, and liberal Dozhd TV and Ekho Moskvy radio allows opposition figures to express their views. But the main obstacle is their lack of unity and the deep fractures in the liberal movement, in addition to a lack of a clear leader and a specific policy platform.

Instead, the opposition offers hopes and dreams with no tangible explanations of how they might actually work and who would direct the policies. Furthermore, leading personalities, with the exception of Navalny and a few others, seem to spend more time courting foreign attention than domestic audiences.

Then there is Putin’s genuine personal popularity and a belief that, no matter how bad things are presently, Russia has improved immensely during the 15 years that he has been in power.

Many Russians who spend time abroad speak of almost entering a parallel universe when they compare Western media coverage of Russia and their own practical experiences at home. Most Russians would never claim their country is perfect by any measure, but they do largely believe that foreign impressions of Russia are far too negative. Without question, these are challenging times in Russia, but the people are already accustomed to upheaval and don’t seem to be panicking. The revolution has been postponed. Again.