Rossiya Scan: WW3, Seychelles and Isolation

"How The World Sees Russia" Issue #34: 11/17/2018 From the Publisher: In this issue we re-visit the readiness of the U.S military for a conflict with Russia. This past week, a report by a bipartisan group of experts warned the U.S congress that the U.S could lose a war with Russia or China, if it occurred. The U.S military is losing its might, and needs to make drastic changes to its defense strategy, if it wishes to maintain its leadership position in the realm of defense. Russia and China have developed weapons, and are strengthening their capabilities in fronts where the U.S has lost focused or ignored. Of course, both of these growing powers also face problems, and the U.S is not about to be dethroned anytime soon. However, if the U.S continues its current policy, and does not update its defense approach, which Russia and China are doing (or have), it will lose its leadership position. One of the negatives of this ongoing arms race is the probability of it breaking into conflict. Poor communication is likely to be the culprit of such an escalation. Currently, Washington D.C. and Moscow do not have the best of relationships, and are poorly communicating. Official lines between both seem unproductive, or at times un-existent. Hence, the rise of unofficial ones. In this issue we are taking a look at one that appears to have been born out of a meeting between two connected businessmen in the Seychelles. We then revisit again the topic of sanctions. Isolating Russia is proving to be difficult because of the negative repercussions that an unstable Russia can have on the global market. Also, how the shaming of Russian businessmen has also become a public relations weapon. -Rossiya Scan REPORT: U.S Could Lose War Against Russia...or China... It's official. Despite mentions, and warnings from retired and non-retired U.S military leaders, Russia and China are no longer just countries with large militaries that the U.S could conventionally win against. Of course, the U.S still holds a considerable amount of advantages over Russia and China in defense matters. However, these advantages are weakening, and causing enough of a concern that the U.S government is beginning to take notice. “It might struggle to win, or perhaps lose, a war against China or Russia. The United States is particularly at risk of being overwhelmed should its military be forced to fight on two or more fronts simultaneously," stated the report, Providing For the Common Defense: The Assessment and Recommendations of the National Defense Strategy Commission , written by a bipartisan group tasked by U.S politicians with analyzing the current state of U.S defense capabilities. "U.S military superiority is no longer assured and the implications for American interests and American security are severe.” The undisputed supremacy the U.S has had since the end of the Cold War is eroding. The experts from the commission, which was spearheaded by former U.S Undersecretary of Defense Eric Edelman and Gary Roughead, an ex-Chief of U.S Naval Operations, came to this conclusion after a careful review of secret documents, plus in-depth interviews with important defense officials. “America’s military capabilities are insufficient to address the growing dangers the country faces,” said the report. "Put bluntly, the U.S. military could lose the next state-versus-state war it fights.” Hybrid warfare was particularly cited as a place where the U.S military is ill equipped to properly counter a Russian or Chinese offensive. “Grey-zone aggression – intimidation and coercion in the space between war and peace – [which] has become the tool of choice for many,” stated the report. However, superiority in conventional weaponry is also taking a hit. The bottom line is that in anti-air denial systems , cyber weaponry, Russia and China are quickly matching or beating the U.S in terms of capabilities. This reality is seriously weakening the U.S from exercising something it has had in the past, which is referred to in the report as a “a-hard powered backbone.” The latter is the capacity to deploy an overwhelming amphibious military force, like it did in World War II, or maintain air superiority, as it has with the Global War on Terror. Just imagine, if a conventional invasion of North Korea is predicted to be a bloodbath for the U.S. military, (according to experts on the topic) a conflict with a major power like Russia and China would obviously be disastrous. “[The U.S] would face daunting challenges in establishing air superiority or sea control and retaking territory lost early in a conflict,” said the report. “Against an enemy equipped with advanced anti-access/area denial capabilities, attrition of U.S. capital assets—ships, planes, tanks—could be enormous.” How could a country which spends more on defense then the next 7 highest spending nations find itself in such a situation? Experts seem to pinpoint a key-reason. The latter is referred to as readiness, which is the ability of the U.S military to go to war immediately. The reason for the weakening of this once ever-present capacity of American power is said to be the result of two ongoing realities. One is the fact the U.S military has been fighting a non-conventional war in many fronts. Hence, it has shifted its sources and developed strengths to meet the demands of this unique conflict, which are not the same as those of properly facing a major war with a state-nuclear actor. The other is (surprisingly) money. The report cites U.S President Barack Obama's administration 2011 Budget Control Act as a cause for this lack of readiness, stating that it has had, “pronounced detrimental effects on the size, modernization, and readiness of the military”. On the other hand, the report praised Trump's pledge to further build and modernize the U.S Armed Forces to counter global actors like China and Russia. However, it stated that Trump's plan does not go far enough. With so many War Games taking place , and global hotspots , where state actors are actively making their military presence felt near borders where war is perceived to potentially take place, we we were bound to see an official statement by what is still the major global power. This report is not so much a warning for the U.S itself that it is losing its might, but also a signal to the world that it is shifting its focus in an effort to recuperate. Despite these defense pitfalls by the U.S, we should also bear in remind that both Russia and China, still have major problems with their growing militaries. With this ongoing shift in defense concerns by all parties their is an increase in potential miscommunications, and for a 'Hot War'. “Unfortunately, neither side has managed to set up continuous and regular “track one” [official diplomatic] meetings that cover military issues, and the militaries don’t talk to one another at a high level," said Dr. Nicola Leveringhaus, a professor of war studies at King's College London in an interview with The Independent. “The bigger, and more likely fear, is of escalation to a nuclear level involving China or Russia. This could happen inadvertently, from either side, through poor communication." Finally, all sides are aware of the consequences of a major conflict, hence it still remains unlikely that a war will happen between these nuclear powers. That being said, such discussions are increasingly normalizing the idea of such a human catastrophe, and the more these powers grow weary of each other, the more likely it becomes. Read more: Document: The Assessment and Recommendations of the National Defense Strategy Commission. "Despite Record Spending, The U.S Miltary Would Be At 'Grave Risk' in a War with Russia or China," by Jared Keller for the Pacific Standard. "Report: America Could Lose War Against Russia or China" by the National Interest. "U.S 'Might Lose' War Against China or Russia, Report to Congress Says," by Jon Sharman for The Independent. What Happened In The Seychelles? The art of diplomacy consists of pushing forward your agenda, without revealing your true intentions, and getting it. At times, this means creating a backchannel of communication, to advance your cause while aligning your goals with an actor that you don’t want to be perceived as cooperating with, but at the same time have to. Russian meddling in the 2016 U.S presidential elections has been a hot topic. This issue caused an unprecedented decision by U.S President Donald Trump, which was the removal of former FBI director Michael Comey, as soon as he began a politically sensitive investigation into Trump’s presidential campaign. In this issue, Rossiya Scan wants to discuss a hush-hush meeting which took place on the 11 th of January 2017, at the Four Seasons hotel in the Seychelles; just before Trump’s inauguration. The attendees at the meeting were Erik Prince, Kirill Dimitriev and George Nader. Erik Prince is a close supporter of Trump, so much so, that he donated close to $150,000 to pro-Trump political groups during his presidential campaign. However, Prince is more acclaimed for being the founder and CEO of former defense contracting group Blackwater, which today is known as Academi. Academi is considered the biggest private army ever assembled, a real player in times of conflict. Kirill Dimitriev, CEO of Russian Direct Investment Fund (RDIF), and alleged close friend to Russian President Vladimir Putin’s daughter, is thought to be the link between the Kremlin and the White house. Last but not least, George Nader (Lebanese-American), advisor to the Crown prince of the United Arab Emirates (UAE), which awarded Erik Prince in 2011 a $529MM contract to suppress pro-democracy revolts in the Middle East during the Arab Spring. Many assumptions can be made from what was discussed in this meeting, but nobody knows for sure. Nonetheless, one thing is clear, the Kremlin and the White House

"How The World Sees Russia"

Issue #34: 11/17/2018

From the Publisher:

In this issue we re-visit the readiness of the U.S military for a conflict with Russia.

This past week, a report by a bipartisan group of experts warned the U.S congress that the U.S could lose a war with Russia or China, if it occurred. The U.S military is losing its might, and needs to make drastic changes to its defense strategy, if it wishes to maintain its leadership position in the realm of defense.

Russia and China have developed weapons, and are strengthening their capabilities in fronts where the U.S has lost focused or ignored. Of course, both of these growing powers also face problems, and the U.S is not about to be dethroned anytime soon. However, if the U.S continues its current policy, and does not update its defense approach, which Russia and China are doing (or have), it will lose its leadership position.

One of the negatives of this ongoing arms race is the probability of it breaking into conflict. Poor communication is likely to be the culprit of such an escalation. Currently, Washington D.C. and Moscow do not have the best of relationships, and are poorly communicating. Official lines between both seem unproductive, or at times un-existent. Hence, the rise of unofficial ones. In this issue we are taking a look at one that appears to have been born out of a meeting between two connected businessmen in the Seychelles.

We then revisit again the topic of sanctions. Isolating Russia is proving to be difficult because of the negative repercussions that an unstable Russia can have on the global market. Also, how the shaming of Russian businessmen has also become a public relations weapon.

-Rossiya Scan

REPORT: U.S Could Lose War Against Russia...or China...

It's official.

Despite mentions, and warnings from retired and non-retired U.S military leaders, Russia and China are no longer just countries with large militaries that the U.S could conventionally win against. Of course, the U.S still holds a considerable amount of advantages over Russia and China in defense matters. However, these advantages are weakening, and causing enough of a concern that the U.S government is beginning to take notice.

“It might struggle to win, or perhaps lose, a war against China or Russia. The United States is particularly at risk of being overwhelmed should its military be forced to fight on two or more fronts simultaneously," stated the report, Providing For the Common Defense: The Assessment and Recommendations of the National Defense Strategy Commission, written by a bipartisan group tasked by U.S politicians with analyzing the current state of U.S defense capabilities. "U.S military superiority is no longer assured and the implications for American interests and American security are severe.”

The undisputed supremacy the U.S has had since the end of the Cold War is eroding. The experts from the commission, which was spearheaded by former U.S Undersecretary of Defense Eric Edelman and Gary Roughead, an ex-Chief of U.S Naval Operations, came to this conclusion after a careful review of secret documents, plus in-depth interviews with important defense officials.

“America’s military capabilities are insufficient to address the growing dangers the country faces,” said the report. "Put bluntly, the U.S. military could lose the next state-versus-state war it fights.”

Hybrid warfare was particularly cited as a place where the U.S military is ill equipped to properly counter a Russian or Chinese offensive. “Grey-zone aggression – intimidation and coercion in the space between war and peace – [which] has become the tool of choice for many,” stated the report.

However, superiority in conventional weaponry is also taking a hit.

The bottom line is that in anti-air denial systems, cyber weaponry, Russia and China are quickly matching or beating the U.S in terms of capabilities. This reality is seriously weakening the U.S from exercising something it has had in the past, which is referred to in the report as a “a-hard powered backbone.” The latter is the capacity to deploy an overwhelming amphibious military force, like it did in World War II, or maintain air superiority, as it has with the Global War on Terror.

Just imagine, if a conventional invasion of North Korea is predicted to be a bloodbath for the U.S. military, (according to experts on the topic) a conflict with a major power like Russia and China would obviously be disastrous.

“[The U.S] would face daunting challenges in establishing air superiority or sea control and retaking territory lost early in a conflict,” said the report. “Against an enemy equipped with advanced anti-access/area denial capabilities, attrition of U.S. capital assets—ships, planes, tanks—could be enormous.”

How could a country which spends more on defense then the next 7 highest spending nations find itself in such a situation? Experts seem to pinpoint a key-reason. The latter is referred to as readiness, which is the ability of the U.S military to go to war immediately.

The reason for the weakening of this once ever-present capacity of American power is said to be the result of two ongoing realities. One is the fact the U.S military has been fighting a non-conventional war in many fronts. Hence, it has shifted its sources and developed strengths to meet the demands of this unique conflict, which are not the same as those of properly facing a major war with a state-nuclear actor. The other is (surprisingly) money. The report cites U.S President Barack Obama's administration 2011 Budget Control Act as a cause for this lack of readiness, stating that it has had, “pronounced detrimental effects on the size, modernization, and readiness of the military”. On the other hand, the report praised Trump's pledge to further build and modernize the U.S Armed Forces to counter global actors like China and Russia. However, it stated that Trump's plan does not go far enough.

With so many War Games taking place, and global hotspots, where state actors are actively making their military presence felt near borders where war is perceived to potentially take place, we we were bound to see an official statement by what is still the major global power. This report is not so much a warning for the U.S itself that it is losing its might, but also a signal to the world that it is shifting its focus in an effort to recuperate. Despite these defense pitfalls by the U.S, we should also bear in remind that both Russia and China, still have major problems with their growing militaries.

With this ongoing shift in defense concerns by all parties their is an increase in potential miscommunications, and for a 'Hot War'. “Unfortunately, neither side has managed to set up continuous and regular “track one” [official diplomatic] meetings that cover military issues, and the militaries don’t talk to one another at a high level," said Dr. Nicola Leveringhaus, a professor of war studies at King's College London in an interview with The Independent. “The bigger, and more likely fear, is of escalation to a nuclear level involving China or Russia. This could happen inadvertently, from either side, through poor communication."

Finally, all sides are aware of the consequences of a major conflict, hence it still remains unlikely that a war will happen between these nuclear powers. That being said, such discussions are increasingly normalizing the idea of such a human catastrophe, and the more these powers grow weary of each other, the more likely it becomes.

"Despite Record Spending, The U.S Miltary Would Be At 'Grave Risk' in a War with Russia or China," by Jared Keller for the Pacific Standard.

"Report: America Could Lose War Against Russia or China" by the National Interest.

"U.S 'Might Lose' War Against China or Russia, Report to Congress Says," by Jon Sharman for The Independent.

What Happened In The Seychelles?

The art of diplomacy consists of pushing forward your agenda, without revealing your true intentions, and getting it. At times, this means creating a backchannel of communication, to advance your cause while aligning your goals with an actor that you don’t want to be perceived as cooperating with, but at the same time have to.

Russian meddling in the 2016 U.S presidential elections has been a hot topic. This issue caused an unprecedented decision by U.S President Donald Trump, which was the removal of former FBI director Michael Comey, as soon as he began a politically sensitive investigation into Trump’s presidential campaign.

In this issue, Rossiya Scan wants to discuss a hush-hush meeting which took place on the 11^th of January 2017, at the Four Seasons hotel in the Seychelles; just before Trump’s inauguration. The attendees at the meeting were Erik Prince, Kirill Dimitriev and George Nader.

Erik Prince is a close supporter of Trump, so much so, that he donated close to $150,000 to pro-Trump political groups during his presidential campaign. However, Prince is more acclaimed for being the founder and CEO of former defense contracting group Blackwater, which today is known as Academi. Academi is considered the biggest private army ever assembled, a real player in times of conflict.

Kirill Dimitriev, CEO of Russian Direct Investment Fund (RDIF), and alleged close friend to Russian President Vladimir Putin’s daughter, is thought to be the link between the Kremlin and the White house. Last but not least, George Nader (Lebanese-American), advisor to the Crown prince of the United Arab Emirates (UAE), which awarded Erik Prince in 2011 a $529MM contract to suppress pro-democracy revolts in the Middle East during the Arab Spring.

Many assumptions can be made from what was discussed in this meeting, but nobody knows for sure. Nonetheless, one thing is clear, the Kremlin and the White House have a closer relationship than what they want to project to the world.

A version of what was discussed in the meeting in Seychelles, was investigated by Special Counsel Robert Mueller, who is currently heading the investigation on the alleged Russian meddling of the 2016 U.S elections.

The report claims that one of the main points of discussion during the meeting was to coordinate a joint military action in Syria against ISIS (let’s not forget, that Russia and the U.S back different sides of the conflict, but have ISIS and other radical Islamic terrorist organizations as a common enemy). Moreover, to create stronger economic and bilateral trade ties between both nations, as well as the sharing of intelligence on counter-terrorism.

In prior issues, we have pointed out the double game that Russia is playing with China, and the Middle East, where it has become the power broker. Now we are seeing evidence, that Russia is playing a double game with the U.S.

Even though Russia does project a closer relationship with China, with its obvious hostility to the U.S, many things happen behind the scenes. At Rossiya Scan, we believe that Putin and Trump have a good understanding between each other in regards to some matters. As we believe their political agenda is closely aligned in regards to China, amongst other things.

“Erik Prince and the US foreign meddling investigation,” by Creede Newton for Al Jazeera.

“Mueller gathers evidence that 2017 Seychelles meeting was effort to establish back channel to Kremlin” by Sari Horwitz and Devlin Barrett for the Washington Post.

“Friend of Putin’s daughter, banker with $10 billion: Kirill Dmitriev, a possible link between the Kremlin and Trump,” by staff at the Bell.

Isolating Russia…Without Ripple Effects … is Difficult

The world needs Russia’s commodities.

This in part justifies why the U.S Treasury has once again extended the deadline for sanctions pertaining to EN+ (MCX:ENPL) and Rusal (MCX:RUAL). They understand that imposing sanctions toO swiftly will damage the markets by increasing volatility, and risk generating a supply glut. This is also one of the reasons why Russia has challenged the U.S by continuing its business dealings with Iran. The U.S cannot sanction Russia’s oil industry without seeing a surge in oil prices, and growing unrest.

Furthermore, commodities are not the only good Russia is exporting. The S-400 missile system has been finding buyers, in India, Turkey, Saudi Arabia and other places. The fact is, some countries wish to buy the best weapons out there, and for the moment this Russian system is unparalleled.

Necessary or superior products, undermines the attempt of both the U.S and the EU to offset Russian businesses, and isolate them. These sanctions have also done something the West had not fully anticipated, it is drawing Russia closer to China, and providing it with financing. Isolation was possible 30 years ago, with a globalized and interconnected world it is simply not possible. The more sanctions the U.S imposes on Russia, the stronger are the odds of third party countries stepping away from the U.S and the West.

Among the ways some are defying the U.S is by moving away from the dollar as a reserve currency. If they manage to bring a substantial amount of trade to another basket of currencies, which excludes the dollar, this would in turn lead to an increase in the yield for dollar bonds. Hence cause financing in the U.S to grow more and more expensive. A big part of the U.S market ,and in particular shale, relies heavily on cheap debt to continue operating. If yields rise by 0.5-1% many of these firms will be forced to declare bankruptcy. Additionally, for countries going towards de-dollarization, this would make them somewhat more impervious to U.S sanctions.

Ever since sanctions were imposed on Russia in 2014 its economy has been hurting. However, over the past year the economy has begun to grow again thanks to the increase in the price of oil. It is estimated that since 2014, Russia has lost as much as 6% of its GDP. Oil prices have of course helped to offset some of the slumps in Russia’s GDP growth, but they are insufficient as of now. Any gains can also be wiped out if the price of oil collapses, similarly to what happened to the USSR in the 80’s, or Russia in the early 90’s.

The bottom line, is that Russia has been increasingly isolated by the U.S. However, Russia’s influence in the supply of wanted commodities means that it cannot be seriously hurt without causing a global impact on everyone. Also, that despite this position, Russia is moving forward and creating safeguards against Western sanctions. Thereby placing itself in a more resilient position for any future sanctions.

"Why Sanctions are Failing to Isolate Russia" by Anna Dedhar for the Financial Times.

"U.S Extends Rusal, EN+ Sanctions Waiver for Sixth Time" by Samuel Rubenfeld for the Wall Street Journal.

"U.S Postpones Sanction Deadline on Russian Tycoon’s Firms," by Tim Ahmnann, Susan Heavey, Nathan Layne Polina Devitt and Susan Thomas for Reuters.

"Ruble Jumps as U.S Makes ‘Common Sense’ Move on Rusal Sanctions," by Anna Andrianova for Bloomberg.

"Russia Demotes Dollar’s role at Home, Taking a Swipe at the U.S" by Georgi Kantchev for the Wall Street Journal.

"Here’s One Measure that Shows Sanctions on Russia are Working" by Natasha Doff for Bloomberg.

"Prospects for Russia’s Sanctions-Bruised Economy are Dim," by Scott Johnson and Natasha Doff for Bloomberg.

Sanctions Not Working? Perhaps Shaming is Better…

Last week, it was announced that the World Economic Forum in Davos disinvited some of the Russian businessmen sanctioned by the U.S Treasury. These included Oleg Deripaska and Viktor Vekselberg, but also surprisingly, Andrei Kostin, who runs VTB (MCX:VTBR) , Russia’s second largest lender, despite the fact that he is not present on any sanctions list.

Even though sanctioned people are barred from entry to the U.S, they have full rights of going to Switzerland. As such, the organizers of the forum, in fear of reprisals from the U.S delegation carried out a pre-emptive strike, and barred them from an event they have been attending for years.

In response to this request by the World Economic Forum, Russian Prime Minister Dmitry Medvedev stated that the Russian delegation would not attend, unless the ‘ban’ is lifted. Again, on the one side, this move isolates Russian and creates a more of a rift with the West. This type of shaming is going to further push Russians away from the West, and further weaken attempts at a reconciliation.

As we saw with Roman Abramovich's loss of his UK visa, Russian businessmen are facing a dire situation. They are also getting aggravated, and other ‘pariah’ states or leaders from places like, Turkey, China and Saudi Arabia are leaguing closely together, plus beginning to strengthen their business dealings.

Additionally, since U.S sanctions can hit anyone (friend or foe) the EU is already considering stepping somewhat aside from its traditional ally, be it on Iran or on Nord Stream 2.

Business is connected everywhere, and despite what we might consider or wish for, we all need to do business together. Unilaterally ‘sanctioning’ people without a broader coalition is not an effective way to conduct business, or diplomacy.

"Russia Threatens to Boycott Davos," by Max Seddon for the Financial Times.

"Russia’s Putin Says Everyone Should be Free to Attend Davos," by Vladimir Soldatkin, Tom Balmforth, Gareth Jones for Reuters.

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