It is still there. How do sanctions (not) work. Helping Ukraine is wrong. The Minister’s optimism

January 11, 2022

If there is no foreign involvement, it is still there

The events in Kazakhstan remain front-page news, and most experts seem to come to a consensus in explaining what happened—two political clans clashed for power. Russia’s military intervention predetermined the victory of the incumbent president. [That’s what I was talking about in the January 7 issue.] Judging by the actions of Kazakh authorities, the primary opponent of President Tokayev was the former Prime Minister of Kazakhstan (2007-2012 and 2014-2016) and, since 2019, the head of the National Security Committee, Karim Massimov. After the departure of Nursultan Nazarbayev, Massimov was the curator of all power structures. On January 8, Massimov was detained and charged with high treason. President Tokayev gave the same interpretation of events when he spoke at a CSTO Collective Security Council session on January 10: “We are talking about an attempted coup d’état.”

The CSTO Treaty does not provide for the participation of member countries in each other’s internal political conflicts and limits military aid to cases of external aggression only. To date, the Kazakh authorities, despite numerous statements about external attacks, have been unable to provide any evidence of even minimal involvement of external forces. 

This was confirmed by President Tokayev, who promised to deliver such proof later on: “We already see that there are questions about the legitimacy of the introduction of CSTO forces. This is due to the lack of reliable information and misunderstanding of the whole situation... Shortly, after a preliminary investigation, we will present to the world community additional evidence of the preparation and implementation of the terrorist aggression against our country.”

Important to note, President Tokayev deleted from his authorized Twitter page a message he posted on January 5: “The bandits and terrorists are very well trained, organized; they are led from a special center. Some of them spoke a language other than Kazakh... there were at least six waves of terrorist attacks in Almaty; their total number was 20,000.”

At the mentioned session of the CSTO Collective Security Council, the leader of Belarus, Alexander Lukashenko, vigorously supported the topic of external aggression against Kazakhstan. 

“The analysis of the events in Kazakhstan shows the presence of an external factor... Not so long ago, Belarus also experienced a similarly combined onslaught... Around the people and state close to us, Kazakhstan, too many people have accumulated wanting to blow up the situation around the Central Asian post-Soviet republics. More recently, Afghanistan was added to this... The main body of protesters in Kazakhstan consists of professional terrorist fighters... We need to improve the controllability of CSTO and the forces that we are ready to involve... serious challenges await us in the future... The introduction of CSTO forces disrupted the plans of those who ordered the provoked conflict... We cannot allow the peacekeeping contingent to appear as occupiers... Our friend, who is responsible for this huge country, invited us. And we gave the support that he demanded of us. It’s a lesson for everyone. It’s a precedent. A good precedent.”    

Vladimir Putin couldn’t get past this topic either, and in doing so, observed some analogies to the events in Ukraine that only he could see.

“We understand that the threat to Kazakhstan’s statehood was not caused by spontaneous protests over fuel prices but by the fact that destructive internal and external forces took advantage of the situation.

“In this case, the elements of force and information support of the protests inherent in the ‘Maidan’ technologies were actively used. Well-organized and well-controlled groups of militants were used... including those who have, obviously have, been trained in terrorist camps abroad... their attack on Kazakhstan—and in fact, this attack on the country, on Kazakhstan—was, in fact, an act of aggression. I fully agree with that.

“We view our joint actions as highly timely and absolutely, of course, a legitimate action. CSTO units are in Kazakhstan at the official request of the republic’s leadership and in full accordance with Article 4 of the fundamental Treaty on Collective Security of 1992. It stipulates that if aggression is committed against any member states, all other countries will immediately provide it with the necessary support and assistance, including military aid, at its request. And we are witnessing aggression of international terrorism: Where did these gangs of armed men trained in foreign centers and clearly have experience of combat operations in hot spots of the planet come from?”

Summarizing the discussion of the leaders of the CSTO member states, it seems to me that Putin has received a mandate for the unrestricted use of Russian troops on the territories of these countries. But nothing in this world is free: At the same meeting, the leader of Tajikistan, Emomali Rahmon, said that “we are particularly concerned that no targeted interstate military force has yet been adopted to strengthen the Tajik-Afghan border... we need to create a ‘security belt’ around Afghanistan.” Although the CSTO includes six countries, it is evident that only Russia can try solving these problems. With the full support and approval of the other participants, of course.

They met. Talked

The meeting of the Russian and U.S. delegations on strategic security issues in Geneva on January 10, lasted eight hours. No one expected a breakthrough agreement, and the statements of the delegation leaders were widely expected. Three main points can be singled out.

The discussions will continue. The First Deputy Secretary of State, Wendy Sherman, said, “We’re not negotiating, we’re not discussing any specific text... We’re trying to have serious and frank communication to better understand each other’s concerns and priorities.” Sergey Ryabkov, First Deputy Foreign Minister of Russia, put it in slightly different words: “The conversation was complicated, but very professional, deep, specific, without any attempts to sugarcoat anything, to skirt some sharp corners. Our impression is that the U.S. side has taken the Russian side’s conclusions very seriously and has studied them thoroughly.”

The positions of the sides are very far apart. While Sherman made it clear that meetings and discussions in the Russia-U.S. format would continue, Ryabkov said that the Russian leadership would decide whether to continue contacts with the U.S., based on the results of the upcoming consultations with NATO and within the OSCE this week. 

“We explained why obtaining legal guarantees not to expand NATO is an absolute imperative; why it is imperative for us to obtain legal guarantees not to deploy appropriate strike weapons near Russian borders that can hit targets on our territory; and why we are raising the question of why NATO should largely abandon that material development of territories of NATO member states since 1997. We have made it clear that without progress on these three key, irrevocable, integral, necessary-for-us aspects, the work on other aspects, though important, will be in question.”

Ukraine cannot sleep in peace. Asked whether the U.S. delegation had evidence that Russia was ready to de-escalate the situation on its border with Ukraine, Wendy Sherman said, “I don’t think we know the answer to that question... They can prove that they have no intention to invade by returning the military to their deployment sites.” In response, Sergey Ryabkov reiterated the thesis that “...we do not have and cannot have any plans, intentions to ‘attack’ Ukraine, and all activities for combat training of troops, forces, are carried out within our territory.”

How do sanctions (not) work

I often have to answer a question: How do Western sanctions against Russia work? The short answer is “poorly.” Another proof of this was President Putin’s directive “to the Government of the Russian Federation to take measures aimed at further developing the communications infrastructure in the territories of the Republic of Crimea and Sevastopol, to improve the quality of mobile cell phone communications services, data transmission services and provision of access to the information and telecommunications network ‘internet’ and accessibility of such services for the households.”

After Russia’s annexation of Crimea, Western countries imposed a ban on operations on this peninsula, observed by all Russian companies working with Western financial markets. However, this ban in no way limits the work of state structures (for example, the Bank of Russia or the Russian Treasury, which organized the functioning of their payment systems in Crimea) or companies that do not enter international markets. Today in Crimea, communication services are provided by four local companies. In addition, Crimean residents often use SIM cards of the major Russian operators attached to the Krasnodar region. 

The strength of any sanctions is that the countries that impose them send appropriate warning messages from time to time. As soon as this practice stops, the sanctions cease to have any real impact, even if they remain legally valid. It happened, for example, with the ban on Russian banks and companies’ access to financial markets. The ban imposed in 2014 affected half a dozen banks and companies. Still, the interpretation of the sanctions by the U.S. administration made it impossible even for the Russian Federation to offer bonds. As soon as the interpretation of the sanctions was relaxed, the ban on access to capital markets ceased to work.

Today, U.S. and European companies “are prohibited from transferring, selling, or leasing telecommunications equipment in Crimea, in particular, satellite and terrestrial communication systems.” But for all its strictness, this ban is likely to be easily circumvented. By August 1, the Russian government will tell Vladimir Putin how it is done. 

Sugar prices defeated! Taking on coal

Fighting inflation in Russia by imposing administrative restrictions is gradually broadening its scope. This time, Vladimir Putin instructed the government to stabilize coal prices and ensure its uninterrupted supply to the households and the housing and utilities system. During his press conference at the end of December, he stated that local authorities should buy appropriate quantities of fuel in time and discuss pricing with coal companies, “which make good profits on exports.” The President also noted that there was a mechanism for subsidizing the problem. It is unlikely that the Russian leader meant subsidizing at the expense of the budget. I am ready to assume that he meant the “social responsibility” of Russian business, which will gladly agree to subsidize coal prices at the expense of their profits.

Helping Ukraine is wrong

Ukraine is going through a severe energy crisis. The country has traditionally been a net importer of oil and gas. After it lost control of Donbas because of the military conflict with Russia, it became necessary to import coal, fuel for a quarter of all electricity generation in the country. The illiberalized gas market and populism of the Ukrainian authorities led to a minimum level of gas reserves in the country. In the event of cold winter, there will be a gas shortage. The situation with coal generation is complicated because a significant share of coal is produced in state-owned mines, which require constant subsidies. At the same time, a considerable percentage of the coal generation is in the hands of companies controlled by the state, which have been unable to purchase enough coal. As a result, according to Ukrenergo, operator of the power grids in the country, 23 units of Ukrainian thermal power plants and cogeneration plants with a total capacity of 6.85 GW (13.3% of total) are not operating due to lack of coal.