March 1, 2022
War
The Russian army now has switched to the “Chechen tactic” of waging war in Ukraine, which involves encircling major population centers and virtually wiping them off the face of the earth with artillery and air fire. The most severe destruction is now being suffered by Kharkiv, the capture of which would open the way for the aggressor to advance to the south and southwest. Such a move would allow it to reach the area of Dnepr, Ukraine’s third-largest city, and separate the most combat-ready “Donetsk” grouping of the Ukrainian army from the Dnepr River, depriving it of communication with Kyiv and the rest of the military.
Russian troops have passed the city of Sumy and are moving toward Kyiv from the east. If Russia’s tactics do not change, missile attacks on Ukrainian capitals will soon begin. Today, the Russian army launched missile strikes on Kyiv’s television tower, causing many channels to stop broadcasting.
Russian troops "cut off" the city of Mariupol, located on the shores of the Sea of Azov.
At Ukraine’s request, the European Court of Human Rights (ECHR) ordered Russian authorities not to attack civilians and civilian infrastructure.
The court said that the ECHR pointed to the Russian authorities to immediately ensure the safety of medical facilities, personnel, and ambulances on the territory under attack. These are urgent measures by Rule 39 of the ECHR Rules, which provides the possibility of ordering urgent measures in cases where there is a threat of irreparable harm.
I do not think that Russia will comply with the court’s demand.
On February 26, Ukraine filed a lawsuit with the International Court of Justice alleging that Russia violated the Convention on the Prevention and Punishment of the Crime of Genocide. Today, the court announced that it would hold the first hearing on the suit on March 7 and 8. In its lawsuit, Ukraine demands, among other things, the imposition of interim measures requiring Russia to cease military action.
Censorship
The Russian Prosecutor General’s Office ordered that Ekho Moskvy radio station and Dozhd TV station be disconnected from broadcasting “due to the purposeful and systematic posting of information calling for extremist activities, violence, and knowingly false information regarding the actions of Russian servicemen in the special operation to protect the DNR and LNR .”
Echo of Moscow and Dozhd were the only media outlets that operated in 24*7 mode and actively invited people who disapproved of, and criticized, the Kremlin’s policies to air.
“Dozhd is a pay channel. In 2014, under pressure from the Kremlin, satellite and cable channels stopped cooperating with Dozhd, and all broadcasting went online. In August 2021, Dozhd was declared a foreign agent. Dozhd does not disclose the number of its subscribers. The number of subscribers to Dozhd’s YouTube channel has exceeded 3.2 million.
Echo of Moscow has traditionally been one of the three most-popular radio stations in Moscow over the past 20 years, competing with music radio stations. The audience of Ekho Moskvy in Moscow was about 2.2 million people a day and nearly 7 million across Russia. The Ekho Moskvy website has more than 1.2 million subscribers.
Fighting sanctions
Vladimir Putin signed a second decree aimed at easing the impact of sanctions.
This decree prohibits the removal of a foreign currency or “monetary instruments in foreign currency” in amounts exceeding $10,000 from Russia as of March 2. The Russian authorities perceive this measure as effective, capable of blocking the outflow of currency from the country, adopted in addition to the previously adopted ban on the transfer of foreign currency by Russians to their accounts in foreign banks. At the same time, Russians still can use bank cards for these purposes, and I don’t see how the government may block them.
In addition, the President decided to introduce a particular procedure for residents to enter into transactions for ruble-denominated loans and the sale of securities and real estate to foreign persons associated with states that have imposed sanctions against Russia. These transactions will require permission from the government commission on foreign investment, and dealings with real estate and securities can be concluded at organized trades based on permits from the Central Bank in coordination with the Ministry of Finance.
Prime Minister Mikhail Mishustin announced the development of a bill prohibiting foreign companies that have made direct investments in Russia from withdrawing their assets. This decision looks very strange because, for the current functioning of any company, it is much more essential to have appropriate foreign managers and technologists than it is to have an entry in the registry about who owns that company. The departure of 10-20 critical specialists can stop the work of the largest company, although there will be no change in ownership rights.
The government has decided to allocate up to a trillion rubles to buy shares of Russian companies in the face of Western sanctions. The authorities used this practice to support the liquidity of the Russian stock market during the 2008 crisis. This measure is even more relevant now, as the share of foreign investors in the capital of major Russian companies has increased significantly over the past 13 years. Thus, Russian investors will have an opportunity to sell their assets and avoid margin calls on loans received from Russian banks.
The Russian stock market may also receive some support in redeeming its shares by the largest state-owned companies. A decree signed by the President on Monday simplifies this procedure, but it is impossible to predict its scale.
Learning to hide
Russian oligarchs and state-owned companies understand the United States and the European Union rule that a company owned 50% or more by a person on sanctions lists is automatically subject to sanctions. Therefore, many of them have built their corporate schemes so that this level of ownership is not exceeded.
For example, the mining and metallurgical company Metalloinvest stated that the European Union sanctions against Alisher Usmanov will not affect it, as the businessman owns less than 50% of the parent company of the holding. Metalloinvest is the world leader in the production of commodity hot-briquetted iron (40% of the world market), the third-largest producer of pellets in the world, and the fifth-largest producer of commodity iron ore in the world. Most recently, Usmanov’s share was 60%.
The state-controlled VTB Bank, which is on the U.S., EU, and UK sanctions lists, transferred small stakes in several companies to reduce its shareholding to below 50% and get the companies out of the sanctions. E.g. in Pochta-bank VTB sold 2 shares to the CEO of the Pochta-bank.
Mosaic of the day
The ruble and euro rose slowly during the first half of the day. The fall of the ruble accelerated after Russian Defense Minister Sergei Shoigu stated that Russia would continue its military operation in Ukraine “until it achieves its goals; the main task is to protect Russia from an external military threat from Western countries.” As a result, by the end of the day, the dollar exchange rate was 8.2% higher than the day before.
The Moscow Department of Education held an online meeting with Foreign Ministry spokesperson Maria Zakharova for teachers of history and social studies. During the conversation, Zakharova presented the authorities' vision of the special Russian military operation taking place in Ukraine. When asked by teachers what to tell children who say that Russia has invaded Ukraine and violated its sovereignty, Zakharova reiterated President Putin's position that it is about denazification and demilitarization of the country. According to the teachers, she emphasized that "Russia is not invading anywhere, but protecting the republics of the LNR and DNR."
Paramount Hollywood Studios has withdrawn its upcoming spring premieres from Russian distribution—this is the company’s response to Russia’s actions in Ukraine. Earlier, Warner Bros., Sony Pictures, and Disney refused March releases. Revenues from the distribution of films by the five-largest Hollywood studios—Warner Bros., Sony, Disney, Universal, and Paramount—account for 80% of the Russian market. If this measure is maintained over the long term, the largest Russian distribution networks may bankrupt.
Russian TV channels removed the Uralsib Bank commercial featuring Maxim Galkin from their airwaves. The reason was the TV presenter’s critical remarks about the hostilities in Ukraine.
Ford Motor Company announced that it is suspending its operations in Russia. BMW and Hyundai halted their production lines in Russia. Jaguar/Land Rover announced that it had stopped supplying cars to Russia.
Apple and Nike stopped sales at their official online stores in Russia.
Three world leaders of container shipping—Swiss Mediterranean Shipping Company (MSC), Danish Maersk, and French CMA CGM—announced that since March 1, they have stopped accepting new orders for transportation of containers to/from Russia. According to market participants, the share of the three carriers on the Russian market exceeds 50%. Previously, the German carrier Hapag-Lloyd, the Singapore alliance Ocean Network Express (ONE), and the Taiwanese operator Yang Ming, as well as several other shipping lines operating in small terminals, reported the suspension of accepting orders until further notice.
Gazprom’s subsidiary, Nord Stream 2 AG, the Nord Stream 2 project operator, has filed for bankruptcy, the Swiss TV channel SRF reported.
After Boeing’s announcement: "We have suspended major operations in Moscow and temporarily closed our office in Kyiv. We have also suspended parts, maintenance and technical support services for Russian airlines” the bulk of the Russian air fleet should be grounded within the next four weeks. Every 28 days each plane should update its software.
On March 1, the Bavarian State Opera and Munich Philharmonic Orchestra ceased cooperation with conductor Valery Gergiev and opera singer Anna Netrebko, who had repeatedly participated in rallies supporting Vladimir Putin and refused to condemn the war against Ukraine.
The Paris Philharmonic canceled scheduled concerts by the Mariinsky Theatre Orchestra under Gergiev in April due to events in Ukraine. Carnegie Hall in New York has decided that Gergiev will not lead the Vienna Philharmonic in three concerts.
Dmitry Volkostrelov, artistic director of the V.S. Meyerhold Centre in Moscow, was fired from his post after he made an anti-war appeal.