"How The World Sees Russia" Issue #5: 28/04/2018 From the Publisher: This week we look again take a close look at the ongoing effect of the U.S. sanctions on Russia. It appears that Russian sanctioned companies, and foreign Russian oligarch-owned firms, are trying to come up with creative ways to be removed from the sanctions list. The U.S Treasury appears to have made an exception for an oligarch-owned Swiss company, as we detail below. However, the question is whether the U.S. will be flexible enough to do so with companies that are actually in Russia, and whose business dealings are heavily tied to Kremlin-policies. In our opinion, it is unlikely that the U.S. will remove sanctions on most of these firms, unless the Kremlin changes its foreign policy agenda substantially. Unsurprisingly, the sanctions as a whole have not weakened Russian President Vladimir Putin’s approval at home. The truth is, sanctions are almost never effective, and in this issue, we look at how this is shaping up domestically for Putin. Finally, this week’s Rossiya Scan also touches upon Russia’s perennial delays in their development of a 5 th generation fighter jet. Russia still does not have one, and it has run into yet another obstacle in their quest to do so. India backed away from a joint program much to Russia’s chagrin. -Rossiya Scan And the score is .... U.S.A 2 - China 1 - Russia 0 Officials from across the world have confirmed that there is a new “Cold War” between Russia, and Western-powers. What is a “Cold War” though? Well…it is the opposite of a “Hot War” or “Shooting War.” Meaning that it is mostly about saber-rattling, proxy-wars and non-conventional warfare. We can see this new "Cold War" taking shape through the constant stream of articles comparing U.S and NATO armament capabilities with Russia’s. Over the past few weeks, many such articles have been published. All analyzing the capabilities of each and how they would fair in an open conflict. Obviously, these so-called “what-if?” scenarios do not include nuclear capabilities. The latter would result in the annihilation of earth as we know it. In such scenarios, air capabilities are a serious point of analysis. The reason being, that air superiority is a must to win a conventional war. Russia has been steadily building up its air-force competencies for some time. But according to the Western-press, despite immense progress, Russia is still behind the U.S in terms of the latest generation of war jets. For example, the Russian SU-35’s is considered a top fighter, but it is still an unknown in regards to how effective it can be in a dog-fight against the U.S F-22 or F-35’s. “Distinguished by its unrivaled maneuverability, most of the Su-35’s electronics and weapons capabilities have caught up with those of Western equivalents, like the F-15 Eagle,” writes Sebastien Roblin for The National Interest.“But while it may be a deadly adversary to F-15s, Eurofighters and Rafales, the big question mark remains how effectively it can contend with fifth-generation stealth fighters such as the F-22 and F-35.” The SU-35 is after all still a 4 th generation fighter jet, while the F-22 and F-35 are 5 th generation. One of the most important differences between these generations is stealth capability. The 5 th generation fighters have it, while the 4 th do not. Currently, the U.S has 2 of the 3 operational 5 th generation fighters. China has the other with their Chengdu-J20. Russia has tried to enter the fray with its SU-57, but it is still in the process of being released, despite reports that the latter was briefly tested in Syria. Recently, however, Russia appears to have had a new setback in its quest for a fully operational 5 th generation fighter. The Fifth Generation Fighter Aircraft (FGFA) program that it was jointly developing with the Indian Air Force has fallen through the cracks. India has officially abandoned the project after 11-years. According to Jane’s 360, this was the result of enduring differences in, “developmental costs and technological capabilities.” The fighter jet was supposed to be a better variant of Russia’s delayed SU-57. The joint program could be re-started in the future, but most experts seem to believe that this is unlikely. In the meantime, it appears that Russia continues to find itself in an obvious 3 rd place, as far as technological jet fighter capabilities. Read more: “Forget Russia’s Stealth Fighter: This is the Plane the Air Force Should Fear,” by Sebastien Roblin for National Interest. “It’s No Surprise, India Finally Ditched It’s Stealth Fighter Program With Russia,” by Joseph Trevithick for The Drive. "India Withdraws from FGFA Project, Leaving Russia To Go it Alone," by Rahul Bedi and Rueben F. Johnson for Jane's 360. Are the Sanctions Working? Probably not... Do sanctions ever work? Lots of ink has been spilled on the efficiency of sanctions as a foreign policy weapon. One only has to look at extreme examples, such as the heavily sanctioned countries of Cuba and North Korea to notice that sometimes these economic bullets might have the exact opposite effect of what they seek. In the sense, that despite finding themselves in crippling economic conditions, the targeted regimes appear to get more authoritarian, and even stronger as a result of them. “They are a very difficult and sensitive policy instrument", said Nicholas Burns, one of the most senior U.S diplomats during the George W. Bush administration in an interview with the BBC. "There are very few examples looking back over the last 25 to 30 years where sanctions have actually succeeded". But what’s going on in Russia with these new rounds of sanctions? Are the Russians turning against President Vladimir Putin? Well…it appears they are not. “They want the people to revolt,” said Yevgeny Govorov in reference to the latest U.S sanctions in an interview with the Washington Post. Govorov works as a driver at an aluminum plant Kamensk-Uralsky, Russia. “But these dumb people don’t understand that the more you pressure Russians, the more they come together.” Putin’s confrontation with the West has led to sanctions, which are affecting the lives of ordinary Russians. That being said, not many are blaming Putin for their troubles. In fact, only 6 percent of Russians would take part in protests against the government, according to the Levada Center, an independent pollster company. “A huge problem is that not everyone can understand cause and effect,” said Yevgeny Roizman, the mayor of Yekaterinburg and a major opposition figure in Russia, in an interview with The Washington Post. “These most basic things — foreign policy and the quality of life today — very few people connect them.” Read more: “Sanctions, Syria Hit Home in Russia, but People Aren’t Turning Against Putin” by Anton Troianovsky for the Washington Post. “Analysis: Do Economic Sanctions Work?” by Jonathan Marcus for the BBC. Sanctions! Hold on… The Russian financial markets and commodity prices have been in a frenzy. Actors do not know who will or could be the next target of the U.S. Treasury and their sanctions. After the announcement of the sanctions, Rusal and En+ have seen their market cap fall by over 50%, and aluminum prices soar more than 15%. This week, the U.S Secretary of the Treasury, Steven Mnuchin announced that sanctions may be eased. French President Emmanuel Macron’s state visit to the U.S. is most likely responsible for this change in position. Since European companies have directly felt the pain of these sanctions. The U.S Treasury may have noticed that the consequences of their sanctions went beyond what was expected. In other words, they were hurting European companies, and not just Russia. As the comment of a potential stay on sanctions became audible, Rusal stock soared a staggering 33% in one session, and aluminum dropped over 13%. This apparent sense of relief is however to be tested. Since the terms and conditions of this stay have yet to be announced. All in all, these sanctions have had the desired effect of scaring the oligarchs, and have shown just how far the US is willing to go. What is to happen now though? Only time will tell... Read more: “Rusal Shares Soar 33% After US Sanctions Could be Eased” by the Financial Times. "Aluminium Falls On US Signals over Rusal Sanctions" by the Financial Times. "Aluminium Groups Warn Rusal Sanctions Risk Smelter Closures" by the Financial Times. Read my lips, “No Oligarchs!” As the news of a possible sway in sanctions against Russian companies began to emerge, the main question on people’s mind was: “How, and under what conditions would the U.S. loosen the sanctions?”. Earlier this week a first glance to a solution began emerging with the Renova group, currently owned by Viktor Vekselberg, a sanctioned oligarch. Renova owns the majority shares in Swiss pump manufacturer Sulzer. The Swiss firm having not gotten any notice about the sanctions was in full distress, for the sanctions could cause its collapse. The CEO of Sulzer stated that their bank called and notified them that they would have to stop doing business with them.This effectively excluded Sulzer from carrying out U.S. dollar operations, a major hit for any company that does international commerce. Other firms like Rio Tinto and Glencore have already canceled orders from other sanctioned groups, in fear of facing legal ramifications themselves. Later that day Sulzer entered into negotiation with the U.S. Treasury, asking if they would still be under the risk of sanctions if Mr Vekselberg were to relinquish his majority share of the firm. By essentially selling his shares, and having a participation of under 50%. According to sources, the U.S. treasury agreed to these terms. Embroiled in this conundrum, Rusal and EN+ have begun similar talks. Oleg Deripaska, the sanctioned