June 21, 2022
Helping Ukraine
Not a referendum, but a mishap
Annexation step by step
Bank of Russia gives in to pressure
Enemies and threats everywhere
Invitation to talks
Expanding the ban
Turn away from the gate
Chinese cars are not going to Russia
German precedent
Better late than never
Helping Ukraine
Last October, the Nobel Committee announced that it had awarded the Peace Prize to Novaya Gazeta Editor-in-Chief Dmitry Muratov and Philippine journalist Maria Ressa for “their efforts to defend freedom of speech, which is a prerequisite for democracy and lasting peace.” Muratov distributed his share of the prize to various NGOs with which Novaya Gazeta collaborated and established the Kamerton (Tuning-Fork) Prize for independent journalists, named after Anna Politkovskaya (the Novaya Gazeta journalist murdered in 2006).
On March 27, 2022, Dmitry Muratov organized an interview with Russian journalists for President Vladimir Zelensky; on the same day, the Russian media censor issued a second warning to Novaya Gazeta—according to Russian law, the newspaper could be liquidated by the authorities at any time after that. On March 28, the Novaya Gazeta editorial board announced a suspension of work until the end of the invasion. More than 50 journalists from the newspaper moved to Riga, where they started Novaya Gazeta Europe.
Dmitry Muratov remained in Moscow. At the end of March, he announced that he would auction off the Nobel Medal he received and donate all the money to help Ukrainian refugees. On June 20, the Nobel Medal was sold for $103.5 million.
Not a referendum, but a mishap
On April 30, the incumbent President of the self-proclaimed republic of South Ossetia, Anatoly Bibilov, lost the presidential election, and to make life difficult for his opponent, two weeks later, before the inauguration of the winner, he signed a decree on holding a referendum on its incorporation into Russia.
This was not part of the Kremlin’s plans because it would inevitably lead to a deterioration of relations with Georgia, with which it has spared no effort to restore ties since the war of 2008 and would have triggered a new wave of sanctions from the West. Therefore, the first task of the newly elected President, Alan Gagloev, was to find a way out of the situation—the South Ossetian legislation did not provide for the cancellation of the decision to call a referendum.
On May 30, Gagloev suspended the referendum decree and flew to Moscow two weeks later to coordinate further steps. On June 21, the head of his administration said that during consultations in Moscow, it was “established that the referendum announced by the decree of President of South Ossetia Bibilov of 13.05.2022 was appointed without prior study and coordination of this issue with the Russian side.”
It turned out that the referendum question read as follows: “Do you support the unification of the Republic of South Ossetia and Russia?” According to Dmitry Peskov, press secretary of the Russian President, this creates a legal mishap: If Russia is to unite with someone, a new procedure must be worked out and written into the constitution, and besides, an entirely new state will emerge as a result.
Annexation step by step
The Russian military has reconfigured the last of seven towers in the Kherson region to broadcast Russian television channels, allowing the Kremlin to broadcast 24 Russian TV channels throughout its territory.
The Russian government has prepared a draft decision, according to which employees of state organizations, as well as employees of organizations and institutions subordinate to the federal authorities sent to the territory of the Donetsk and Luhansk People’s Republics (DNR and LNR), will receive double pay during business trips.
The Kremlin continues to discuss various scenarios related to the future of the occupied part of Ukraine. No decision has been made yet, but Russian authorities are consistently moving toward annexing the Kherson region. On Tuesday, the Deputy Head of the region’s interim administration, Kirill Stremousov, once again said that a referendum on annexation to Russia in the region could take place in the fall but did not give any details. Meanwhile, it became known that on June 7, three unidentified men came to the premises of the State Archive of the Kherson region and, threatening to use automatic weapons, stole voter lists for 2019. Possession of these lists makes it possible to falsify the referendum results, should one be held. Let me remind you that on that day, First Deputy Head of the Kremlin Administration Sergey Kiriyenko, who oversees all issues related to Ukraine, was in Kherson.
In addition to confirming readiness for the referendum, Stremousov said that one Russian bank, whose name was not voiced, had begun operations in the region and had opened the first accounts for legal entities. “The banking system is beginning to come to life... This is all being done very quickly. I think shortly, a month and a half, people will be able to open accounts and try to pay via the internet.”
The annexation of Ukrainian territories may take place as soon as possible without legal formalization after including the occupied territories in the Russian monetary, transport, and information space.
Bank of Russia gives in to pressure
It did not take the Bank of Russia long to resist the pressure of the banking lobby and agree to introduce negative rates on foreign currency deposits in Russia. However, this option will initially be available only for legal entities: Banks will be obliged to maintain positive nominal deposit rates. Still, they will be entitled to introduce special commissions that will exceed the level of deposit rates.
The position of the banks is understandable: In the conditions of sanctions restrictions, the possibilities to place foreign currency funds have sharply decreased, and the threat of introducing new sanctions may result in significant losses. However, I believe an active fight against companies’ foreign currency deposits is fraught with adverse side effects. As of May 1, Russian companies had $67 billion in their current accounts and $79.5 billion in their deposits. Should they decide to convert all their savings into rubles, it might bring the dollar down to 35-40 rubles. If the companies decided to transfer their foreign currency savings abroad, Russian banks would lose about 10% of their deposits and must liquidate some of their assets.
Enemies and threats everywhere
Security Council Secretary Nikolai Patrushev continues to identify new threats to Russia’s political regime’s stability. According to him, one of them is related to Russians’ ability to travel outside the country. Patrushev believes that Russian students studying in the U.S. are returning home as agitators ready to set the stage for scenarios of color revolutions.
Embassies in the U.S. and several European countries give grants and provide training for civil servants. Washington also aims to change school and university education by supporting short-term trips of the best [Russian] students to America, from where they return as agitators ready to carry out so-called democratic transformations and set the stage for color revolution scenarios.
I don’t think the Kremlin is ready to bring down the Iron Curtain and ban Russians from traveling abroad, but I believe a ban on student exchanges is imminent.
Patrushev found another threat in Kaliningrad, where he said attempts by German-controlled nonprofit organizations to promote a project to create a so-called German autonomy had been “neutralized.”
Expanding the ban
Lithuania has extended restrictions on the transportation of sanctioned goods to Kaliningrad to road freight transit, the regional government’s press service said. “The partial restriction of cargo transit also applies to road transport going through Lithuania. That is why these cargoes, like railroad cargoes, can be transported today only by sea.”
Lithuanian customs do not allow vehicles with cargoes covered by the ban coming from Russia to Kaliningrad to cross the Lithuanian-Belarusian border.
“Russia will certainly respond to such hostile actions. Appropriate measures... will be taken shortly. Their consequences will have a serious negative impact on the Lithuanian population,” declared Nikolai Patrushev.
Invitation to talks
A few days ago, the Telegraph reported that two former U.S. Army soldiers were captured in a battle near Kharkiv. According to the article, Alex Drueke, 39, who served in Iraq, and Andy Huynh, 27, had joined as volunteers with one of the AFU’s regular units. They were captured in the early part of June and are believed to be the first American citizens to be caught in the conflict zone in Ukraine.
In an interview with NBC, Russian presidential press secretary Dmitry Peskov said that he could not guarantee that the U.S. citizens captured during the hostilities in Ukraine would not face the death penalty: “I can’t guarantee anything. It depends on the investigation... They took part in the shelling of our military, endangered their lives, and must be held responsible for the crimes committed... There will be a trial and a court decision.”
Peskov called the captured Americans “soldiers of fortune” who were carrying out “illegal activities on Ukrainian territory.” He said the captives had nothing to do with the Ukrainian army and therefore were not covered by the Geneva Conventions and that they would be investigated by “due authorities.” Because the death penalty is prohibited in Russia, Peskov’s words suggest that the Americans are being held captive by separatists.
As is often the case, Peskov repeatedly lied during the two-minute interview. And, as is often the case, the American journalist was unprepared for the conversation and failed to ask Peskov the relevant questions.
First, the Americans had been captured on the territory of Kharkiv Oblast, which Russian troops had invaded, and therefore Russia was responsible for their fate.
Second, the Geneva Conventions define prisoners of war as not only members of the regular army but also volunteers and militia fighting in the army or on their own, as well as servicemen under a government or authority not recognized by the invading power and population spontaneously taking up arms to fight the invading troops.
Third, the Geneva Conventions explicitly state that prisoners of war should not be tried for participation in hostilities.
The Kremlin’s tactics are not new and are well understood: POWs are used as hostages for blackmail negotiations. Peskov’s agreement to give an interview to an American journalist should be perceived as an intrusive invitation to the U.S. President to negotiate with the Kremlin.
Turn away from the gate
The British government attempted to talk with Moscow over the death sentences handed down by a DNR court to two of the kingdom’s subjects. Still, the Russian ambassador in London, Andrey Kelin, stated, “We have a desire to engage in these matters.” In addition, he added that “they need to address the jurisdiction where this military personnel is located—in the DNR.” In mid-April, British subjects Sean Pinner and Aiden Aslin surrendered to the Russian army in Mariupol. On June 9, the DNR Supreme Court sentenced them and Moroccan Brahim Saadoun to death as mercenaries. However, Pinner and Aslin had signed a contract with the Ukrainian army before the war began.
Chinese cars are not going to Russia
Import of cars, components for their assembly, and spare parts from China are not growing in Russia, despite the depletion of European car stocks and suspension of production at Russian car plants (three of 18 plants producing cars are currently in operation).
According to Chinese customs statistics, car imports from China have declined for the past two months, falling to nearly $32 million in May from $190.7 million in March. Imports of parts and components declined to $76.3 million in March and $81.3 million in April versus $117.1 million in February.
German precedent
The Munich prosecutor’s office reported the seizure of three apartments belonging to an unnamed State Duma deputy and his wife. After the sanctions were imposed, they rented out the three apartments they owned and received rent payments, violating German law.
The deputy of the Russian Parliament has been under EU sanctions since February 23 because he voted for an appeal to the Russian President to recognize the self-proclaimed DNR and LNR. According to the prosecutor’s office, his wife is a person associated with him and is thus herself subject to sanctions based on the 2014 EU directive.
Munich’s Chief Prosecutor, Anne Leiding, said, “this is the first case in Germany where not only have assets been frozen, but real estate has been confiscated because of sanctions.” According to her, such actions are possible even though there have been no precedents and decisions of German courts, contrary to other opinions expressed in the media.
Better late than never
Russian authorities canceled the March 1 ban on sales of foreign securities held by Russian residents as of February 22, 2022, to non-residents from “unfriendly countries.”
The government commission passed this decision two weeks ago, on June 8, but it was only published today. The mandatory condition for transactions between residents and non-residents is the transfer of funds to a bank account opened in a Russian bank.
This ban looked strange from the beginning: It struck at the interests of Russian residents, who were buying foreign stocks and bonds without causing any damage to the issuers of the securities. It took government officials more than three months to realize this.