"How The World Sees Russia" Issue #18: 07/28/2018 From the Publisher: This week is going to be a familiar one for Rossiya Scan readers. We re-visit many of the stories affecting Russia and offer our distinct analysis to the situations. We begin by taking a look at Russia’s ongoing work towards strengthening its position as a leader in the tough game of world geopolitics. Russia has already established itself as a the most powerful broker in the Middle East, a force to be reckoned with as far as their capacity to disrupt elections in the West, and has already begun to establish a strong position in central Africa. In this issue, we look at the Asia-Pacific region as it has also become an area where the Kremlin is making moves to further strengthen its far reaching foreign policy. We then move on to the latest happenings regarding the Oleg Deripaska saga, as well as the effect that sanctions have had on Russian companies. Many of the latter have delisted or are contemplating the process of doing so from Western stock exchanges. Sanctions have turned their strong businesses into high-risk assets with volatile prices. There is thus a trend of delisting and looking more inwards (or completely ignoring the West) for financing and growth. Finally, we finish with a piece on U.S. President Donald Trump and Russian President Vladimir Putin. One where we deconstruct Trump’s own individual interests, and speculate over how Putin might be the mentor he is looking for. -Rossiya Scan Asia-Pacific in the ‘Crosshairs’ of Russia At Rossiya Scan, we have analyzed Russia’s geopolitical moves since issue #1. There are places in Europe and the Middle East where Russian moves are most obvious and therefore get most of the news coverage and analysis around the world. These include Syria and the Ukraine. There are many others though, and we at Rossiya Scan have done our best to highlight these lesser known areas, in order to get a better grasp of the Russian playbook as a whole. These lesser known areas include the Central African Republic and Rwanda. Today, however, we would like to highlight another set of countries where Russia is strengthening its position and obtaining positive results. These countries are all found in the influential Asia-Pacific region. “Due to deteriorating relations with Europe and the U.S, Moscow has increasingly turned eastwards,” writes Jacqueline Westermann, a researcher for the Australian Strategic Policy Institute, a non-partisan Canberra-based think. “A pivot of its own to the Pacific that began, as Washington’s did, as a way of scoping for new or extending existing relations, and to maintain Russian influence in the region.” For example, Russia is strengthening its ties with the Philippines. In October 2017, the Kremlin sent three ships with military equipment donations to the Rodrigo Duterte government. That donation was done shortly after a joint Russian and Philippine 2017 military exercise. Vietnam is another country where the Kremlin has worked to enhance its already strong relations. Vietnam has been purchasing Russian arms for decades, but in April 2018, both countries took the relationship closer by signing a military cooperation roadmap agreement. In June 2017, Russia signed a similar military cooperation roadmap agreement with China. Russia has claimed that it has “no dog” in the South China sea conflict. However, its actions show something different. By becoming a partner of China, Vietnam and the Philippines, 3 of the warring parties in the conflict, the Kremlin is on its way to becoming a broker in another complicated geopolitical conflict. Placing itself as a broker among enemies, and creating economic win-win situation for their national defense industry in terms of selling arms. This is similar to the situation Russia created for itself in the Middle East, where it holds the position of “undisputed” broker, and has become the most powerful country in the conflict. Could it achieve such a role in the South China sea? It certainly could, although it be more difficult based on the fact that China is one of the parties involved. Unlike in the Middle East, where the state actors are smaller. That being said, Russia has already found a way to get involved, and have a positive relationship with 50 percent of the nations in the conflict. Of course, Russia is not just making moves in the South China sea. Russia has also been working hard to establish its presence in other parts of the Asia-Pacific region, such as in Fiji. The Kremlin donated a total of 20 containers with small arms to the military of Fiji in 2016. The official use of these weapons would be for UN peacekeeping missions. The arrival of Russian soldiers to ‘train’ Fijian soldiers led to speculation that the containers contained something more sophisticated. The use of small arms have been mastered by every sovereign state, and require little training from so-called 'specialists.' The bottom line, is that Russia continues to strengthen its position as a leader in world conflicts, and showcase its global reach. So far, despite some setbacks, it has managed to achieve this. Its cogent foreign policy, and playbook are strong. In fact, stronger than any currently being practiced by another global, or regional power. Read more: "Is Russia Looking to Expand it's Influence in the Asia Pacific?" by Jacqueline Westermann for Asia Correspondent. "Russian Experts Arrive in Fiji for Weapons Handover," by Radio New Zealand. "China and Russia Sign Military Cooperation Roadmap Agreement," by DD Wu for The Diplomat. Russian Firms Delist Over the course of the past years, financial market observers have noticed that there is a decrease in companies that go for IPO’s. This can be due to various reasons, like costs or the desire to not have to have your company influenced by mobs of uneducated people. However, there has also been another interesting trend, which is the delisting of publicly traded companies. Several years ago, Michael Dell took back into private ownership his namesake company, and guess what? It was a great deal for him. Many Russian firms have gone public over the year on the London Stock Exchange. The latter occurred because it increased their chances of raising capital and gave them easy access to foreign investors. The fact is though that we are currently seeing an inverse effect. For example, this week Megafon (LSE:MFON), a large Moscow-based telephone operator, announced that it would go private. This is the latest sign that Russian businesses are turning more inward, and rather not deal with the difficulties that pose western investors. The West as a whole has also become weary of Russian stocks. In great part because of the U.S sanctions against Rusal (MCX:RUAL) and EN+ (LSE:NPL) . Overall, western investors are reluctant to invest in Russian firms because they could be hit by sanctions, causing their share prices to collapse. Alisher Usmanov, the Uzbek-born Russian billionaire, who is Megafon’s second largest shareholder is also an investor in a holding company that owns Mail.ru, the Russian equivalent of Hotmail. Mail.ru for has stated that they do not plan to delist, but it’s impossible to predict if this statement will stand into future. The current political climate is simply to anarchic. Investors in stocks like to avoid risks, and investing in Russian stocks is a risky business. This explains why they trade at lower multiples despite good performance. Additionally, most of these firms operate in either Russia or in general in the Commonwealth of Independent States (CIS). Therefore, it does not make much sense for them to be traded in London other than to incentivize foreign capital and facilitate financing of operations as a whole. Perhaps, the best approach for now would be that they strictly play the home front, to find ways of appealing to non-Western capital and continue growing behind today’s increasingly nebulous, but all to-real, “Iron Curtain 2.0”. Read more: "Large Russian Companies are Turning Inward," by Leonid Bershidsky for Bloomberg. "Russia's Mail.ru Says No Plans to Delist Shares," by Reuters staff. "Usmanov's MegaFon has $1.26 Billion Plan to Go Private" by Ilya Khrennikov for Bloomberg. EN+: The Clock Ticks, The Saga Continues Ever since Russian billionaire Oleg Deripaska, Rusal (MCX:RUAL) and EN+ (LSE:NPL) were hit by sanctions from the U.S Treasury, the market for aluminum soared, and a fear of a potential glut in global aluminum supply began to emerge. In order to preserve the firm, Deripaska accepted to step down from the company’s management team and to sell down his stake from 70% to under 50% in EN+. This is a difficult situation for the company, because Deripaska has until August to sell his stake. When EN+ was hit by sanctions its share price plunged 60%, and finding a buyer who can pay a fair price is a hard task. Deripaska is not a philanthropist, and like any skilled businessman will not give away his shares. Even as the deadline for the sell down approaches there does not seem to be a buyer. This week it was announced that unless there is a temporary reprieve from the sanctions then EN+ would consider either nationalization by the Russian State or a sale to China. Neither of these options appear would be optimal, and the U.S probably does not wish to see one of the world’s largest aluminum producers fall into the hands of China, with a trade war looming. By August 5 th , investors MUST sell their stake in both EN+ and Rusal or face sanctions from the U.S Treasury. Another effect from the sanctions is the impact they have on other business. Those not owned or run by the sanctioned billionaires. Those businesses are also having a hard time, since it is unclear as to what businesses can or will be sanctioned next. Many companies have ties to oligarchs and investors are too unsure of their own due diligence capabilities, and would rather