| "How The World Sees Russia" Issue #28: 10/06/2018 From the Publisher: This week we start of by looking at the latest in the Balkans. The Former Yugoslav Republic of Macedonia failed to carry out its controversial name referendum. As discussed in issue #17, Macedonia needs to change its name to “Republic of Northern Macedonia,” if it is to be allowed to pursue membership in NATO and the EU. Basically, Greece will continue to block Macedonia’s membership into both if it fails to change its name. In this issue, we look at how Russia might have won this “New Cold War” battle through alleged “meddling”, but also why ultimately their role in the Balkans is bound to fail. Russia's geopolitical moves and meddling are also worrying Sweden. The country is preparing for war. Although such a war remains unlikely, the threat of such a conflict is now enough of a possibility for Sweden to make some important defense decisions. We try to decipher why this is happening, and how history has seen this play out before in this region. We then move on to India’s decision to purchase S-400’s from Russia. This move could lead to sanctions against India from the U.S. as it is a violation of the Countering America's Adversaries Through Sanctions Act (CAATSA). The U. S’s strategic relationship with India, their growing defense trade, and the existence of an exemption clause in the act, is making some believe that Washington might turn the other way on this one. We look at the complications, speculate on scenarios, and again offer our take on the matter. Finally, we look at Russia’s attempts to 'de-dollarize', and contemplate the benefits and feasibility of this strategy from a global stand point. -Rossiya Scan A Win for Russia in the Balkans? The Balkans has been a contested area between Russia and the West for a while. In issue #3 and #17 of Rossiya Scan we delved into some of the potential areas of conflict, and stated that Russia was having a tough time establishing its influence. Why? Nine of the twelve countries in the Balkans (plus Kosovo which is not a United Nations member) are part of NATO, and all are are either in the EU or aspire for membership. Two supranational entities that Russia sees as meddling forces in their historical sphere of influence. However, we also mentioned that Russia’s lack of “giving up” and ongoing alleged strategy to foment discord amongst the few remaining non-EU or NATO members of the Balkans could potentially yield a victory. This tenacity to not let go, despite their failure to contain EU or NATO expansion in this part of Europe, is a strength that with time can help them achieve long-term foreign policy aims. In fact, Russian persistence appears to have gained a victory in Macedonia, one of the last non-EU and non-NATO areas in the Balkans. Last Sunday, September 30, 2018, the Former Yugoslav Republic of Macedonia voted in a referendum to determine whether they would accept to change their county’s name to the Republic of Northern Macedonia. Due to lack of participation (the referendum only had a participation of 37% of the required 50%) the “yes” vote (which would lead to the name change) lost despite obtaining most votes. In fact, over 90% of the 37% that voted supported the name change. The name Macedonia dates back to ancient times. Both Greece and Macedonia have historical claims to it because they both have lands in the area that traces its heritage to the Roman province of Macedonia. They also both claim heritage to Alexander the Great. However, northern regions of Greece also use “Macedonia” in their names. Hence, Athens has made the accusation that Macedonia’s use of the term in its country name gives legitimacy to unlawful claims to Greek land. Greece, a founding member of the EU and longstanding one of NATO, has used its veto position to block all attempts by Macedonia to join both the alliance and bloc. Last June, Macedonia’s Prime Minister Zoran Zaev agreed to a compromise with Greece. Accepting the new name would lead Greece to cease the blocking of Macedonia’s attempts to join the EU and NATO. However, the referendum failed to reach the threshold, and many are pointing at Russia for facilitating this. Claiming that Moscow sowed discord in the country, and inflamed tensions before the vote. U.S. Secretary of Defense James Mathis has even gone as far as accusing Russia of directly funding “influence campaigns” to disrupt the referendum. In July, Russian Foreign Minister Sergey Lavrov cancelled a trip to Greece shortly after Athens expelled two Russian diplomats. The latter was done because Greece accused Russia of supporting the opposition movement in Macedonia to the name change. Russia denies all alleged involvement in the area. Can Russia effectively push back EU and NATO efforts in Macedonia? Can they “win the war” and not just “the battle”? We believe the odds are ultimately stacked up for an eventual Russian loss. The EU and NATO can offer more to Macedonia than Russia can. Membership in the EU could drastically change the lives of the Macedonian people. Specifically, its young people, who face high unemployment, and have few opportunities for prosperity in their small landlocked country. From a realpolitik standpoint, Macedonia’s should embrace the West. The country’s economic conditions will change for the better, and they are also far enough away from Moscow to not face its wrath. In fact, they are increasingly surrounded by the EU, and do not have the political, social, economic or military muscle necessary to be a "Switzerland". They need the EU and NATO to catchup in all the aforementioned areas, and membership is their best chance to do so. Russia, again, cannot offer them this. At the same time, Russia might not necessarily be trying to compete for influence in this region. Instead, they might be simply causing an annoyance to further detract Europe and the U.S from areas where it has more of an interest, and a stronger claim for. Read more: “Macedonia Referendum: Name Change Vote Fails To Reach Threshold,” by the BBC. “How the Renaming of a Country Became a Battleground Between Russia and the West,” by Billy Perrigo. “Macedonia Facing Crisis After Name Change Referendum Hit by Low Turnout,” by Helena Smith for The Guardian. Sweden Prepares for War ... Against Russia Herman Gref, chief executive of Sberbank (MCX:SBER), said that new U.S sanctions would “make the cold war look like child’s play”. This warning was given on January of this year. Now we are at the midst of harsher U.S sanctions being imposed on Russia, and given the provocative rhetoric of Russian officials, it doesn’t take a rocket scientist to grasp the potential consequences of these sanctions in the near future. The question is, where and how? We often highlight Russia’s military actions in the Middle East or Africa. However, the concern of a potential Russian attack is escalating substantially in Northern Europe. Getting to the point, the most recent report of Sweden’s defense commission concluded that a “larger European conflict could start with an attack on Sweden”. Considering that Russia annexed Crimea (even though this was a different situation), having crossed this line, infringing every imaginable international law with no military retaliation. Makes us think, given the fact that Sweden, Finland are not members of NATO and the historical animosity existing, could Russia take action against its Nordic neighbors? Although the scenario remains unlikely… if doing so is necessary for Russia to fulfill its political agenda, it could very well do so. The Russian empire was actually the enemy of Sweden from its expansion towards the East in 1561 at Narva in Estonia, until 1809, when Russia conquered half of Sweden and called it Finland. It has even been said that the USSR was planning to invade Sweden at the end of the 20 th century during the cold war. Blatantly depicting the history behind these two nations, a history of fear and conflict which has been dormant since the end of the cold war. Following the annexation of Crimea, Russia began violating airspace over Nordic and Baltic regions. In 2013 six Russian aircraft carried out a nigh time mission simulating a nuclear attack on Stockholm. This breach of sovereignty in Ukraine was a wake-up call for Sweden, who is gearing up for a potential attack. In the early 2000s Sweden slashed defense spending, in 2014 Anna Wieslander, director of the Swedish Defense Association said, “We are realizing that Crimea was not a passing storm, but climate change”, referring to Russia’s annexation of the Ukrainian peninsula in 2014. Sweden has re-booted spending to their defense program, building bunkers which is a cornerstone of their defense strategy (they have over 65.000 shelters), regularly carrying out exercises with NATO and coordinating a united military response with the neighboring countries, such as Norway and Finland. Sweden is preparing for war, without the help of allies (which would not be immediate), their strategy is to be able to last 3 months independently until the “cavalry” comes. Threats are a function of relative power, which Europe is far superior to Russia, and relative will, in which it is lacking in comparison. That has to change. Read more: “Sweden Plans to Build More Bunkers Amid Fears of Russian Aggression,” by Alexander Smith and Vladimir Banic for NBC News. “Sweden Plans to Build More Bunkers amid Fears of Russian Aggression,” written for The Economist. “Judy Asks: Is Russia Europe’s Biggest Threat?” by Judy Dempsey for the Carnegie Europe . “VTB chief warns of ‘growing threat’ of European Military Conflict,” by Andrei Kostin for the Financial Times. Russia Inks S-400 Deal with U.S. Ally… India, an important U.S ally, could soon be in the crosshairs of U.S sanctions as a result of a $5 billion weapons deal |
"How The World Sees Russia"
Issue #28: 10/06/2018
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From the Publisher:
This week we start of by looking at the latest in the Balkans.
The Former Yugoslav Republic of Macedonia failed to carry out its controversial name referendum. As discussed in issue #17, Macedonia needs to change its name to “Republic of Northern Macedonia,” if it is to be allowed to pursue membership in NATO and the EU. Basically, Greece will continue to block Macedonia’s membership into both if it fails to change its name.
In this issue, we look at how Russia might have won this “New Cold War” battle through alleged “meddling”, but also why ultimately their role in the Balkans is bound to fail.
Russia's geopolitical moves and meddling are also worrying Sweden. The country is preparing for war. Although such a war remains unlikely, the threat of such a conflict is now enough of a possibility for Sweden to make some important defense decisions. We try to decipher why this is happening, and how history has seen this play out before in this region.
We then move on to India’s decision to purchase S-400’s from Russia. This move could lead to sanctions against India from the U.S. as it is a violation of the Countering America's Adversaries Through Sanctions Act (CAATSA).
The U. S’s strategic relationship with India, their growing defense trade, and the existence of an exemption clause in the act, is making some believe that Washington might turn the other way on this one. We look at the complications, speculate on scenarios, and again offer our take on the matter.
Finally, we look at Russia’s attempts to 'de-dollarize', and contemplate the benefits and feasibility of this strategy from a global stand point.
-Rossiya Scan
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A Win for Russia in the Balkans?
The Balkans has been a contested area between Russia and the West for a while. In issue #3 and #17 of Rossiya Scan we delved into some of the potential areas of conflict, and stated that Russia was having a tough time establishing its influence.
Why?
Nine of the twelve countries in the Balkans (plus Kosovo which is not a United Nations member) are part of NATO, and all are are either in the EU or aspire for membership. Two supranational entities that Russia sees as meddling forces in their historical sphere of influence.
However, we also mentioned that Russia’s lack of “giving up” and ongoing alleged strategy to foment discord amongst the few remaining non-EU or NATO members of the Balkans could potentially yield a victory. This tenacity to not let go, despite their failure to contain EU or NATO expansion in this part of Europe, is a strength that with time can help them achieve long-term foreign policy aims.
In fact, Russian persistence appears to have gained a victory in Macedonia, one of the last non-EU and non-NATO areas in the Balkans.
Last Sunday, September 30, 2018, the Former Yugoslav Republic of Macedonia voted in a referendum to determine whether they would accept to change their county’s name to the Republic of Northern Macedonia. Due to lack of participation (the referendum only had a participation of 37% of the required 50%) the “yes” vote (which would lead to the name change) lost despite obtaining most votes. In fact, over 90% of the 37% that voted supported the name change.
The name Macedonia dates back to ancient times. Both Greece and Macedonia have historical claims to it because they both have lands in the area that traces its heritage to the Roman province of Macedonia. They also both claim heritage to Alexander the Great. However, northern regions of Greece also use “Macedonia” in their names. Hence, Athens has made the accusation that Macedonia’s use of the term in its country name gives legitimacy to unlawful claims to Greek land.
Greece, a founding member of the EU and longstanding one of NATO, has used its veto position to block all attempts by Macedonia to join both the alliance and bloc. Last June, Macedonia’s Prime Minister Zoran Zaev agreed to a compromise with Greece. Accepting the new name would lead Greece to cease the blocking of Macedonia’s attempts to join the EU and NATO.
However, the referendum failed to reach the threshold, and many are pointing at Russia for facilitating this. Claiming that Moscow sowed discord in the country, and inflamed tensions before the vote. U.S. Secretary of Defense James Mathis has even gone as far as accusing Russia of directly funding “influence campaigns” to disrupt the referendum.
In July, Russian Foreign Minister Sergey Lavrov cancelled a trip to Greece shortly after Athens expelled two Russian diplomats. The latter was done because Greece accused Russia of supporting the opposition movement in Macedonia to the name change. Russia denies all alleged involvement in the area.
Can Russia effectively push back EU and NATO efforts in Macedonia? Can they “win the war” and not just “the battle”? We believe the odds are ultimately stacked up for an eventual Russian loss. The EU and NATO can offer more to Macedonia than Russia can. Membership in the EU could drastically change the lives of the Macedonian people. Specifically, its young people, who face high unemployment, and have few opportunities for prosperity in their small landlocked country.
From a realpolitik standpoint, Macedonia’s should embrace the West. The country’s economic conditions will change for the better, and they are also far enough away from Moscow to not face its wrath. In fact, they are increasingly surrounded by the EU, and do not have the political, social, economic or military muscle necessary to be a "Switzerland". They need the EU and NATO to catchup in all the aforementioned areas, and membership is their best chance to do so.
Russia, again, cannot offer them this.
At the same time, Russia might not necessarily be trying to compete for influence in this region. Instead, they might be simply causing an annoyance to further detract Europe and the U.S from areas where it has more of an interest, and a stronger claim for.
Read more:
“Macedonia Referendum: Name Change Vote Fails To Reach Threshold,” by the BBC.
“How the Renaming of a Country Became a Battleground Between Russia and the West,” by Billy Perrigo.
“Macedonia Facing Crisis After Name Change Referendum Hit by Low Turnout,” by Helena Smith for The Guardian.
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Sweden Prepares for War ... Against Russia
Herman Gref, chief executive of Sberbank (MCX:SBER), said that new U.S sanctions would “make the cold war look like child’s play”. This warning was given on January of this year. Now we are at the midst of harsher U.S sanctions being imposed on Russia, and given the provocative rhetoric of Russian officials, it doesn’t take a rocket scientist to grasp the potential consequences of these sanctions in the near future. The question is, where and how?
We often highlight Russia’s military actions in the Middle East or Africa. However, the concern of a potential Russian attack is escalating substantially in Northern Europe. Getting to the point, the most recent report of Sweden’s defense commission concluded that a “larger European conflict could start with an attack on Sweden”.
Considering that Russia annexed Crimea (even though this was a different situation), having crossed this line, infringing every imaginable international law with no military retaliation. Makes us think, given the fact that Sweden, Finland are not members of NATO and the historical animosity existing, could Russia take action against its Nordic neighbors? Although the scenario remains unlikely… if doing so is necessary for Russia to fulfill its political agenda, it could very well do so.
The Russian empire was actually the enemy of Sweden from its expansion towards the East in 1561 at Narva in Estonia, until 1809, when Russia conquered half of Sweden and called it Finland. It has even been said that the USSR was planning to invade Sweden at the end of the 20th century during the cold war. Blatantly depicting the history behind these two nations, a history of fear and conflict which has been dormant since the end of the cold war.
Following the annexation of Crimea, Russia began violating airspace over Nordic and Baltic regions. In 2013 six Russian aircraft carried out a nigh time mission simulating a nuclear attack on Stockholm. This breach of sovereignty in Ukraine was a wake-up call for Sweden, who is gearing up for a potential attack.
In the early 2000s Sweden slashed defense spending, in 2014 Anna Wieslander, director of the Swedish Defense Association said, “We are realizing that Crimea was not a passing storm, but climate change”, referring to Russia’s annexation of the Ukrainian peninsula in 2014. Sweden has re-booted spending to their defense program, building bunkers which is a cornerstone of their defense strategy (they have over 65.000 shelters), regularly carrying out exercises with NATO and coordinating a united military response with the neighboring countries, such as Norway and Finland.
Sweden is preparing for war, without the help of allies (which would not be immediate), their strategy is to be able to last 3 months independently until the “cavalry” comes. Threats are a function of relative power, which Europe is far superior to Russia, and relative will, in which it is lacking in comparison. That has to change.
Read more:
“Sweden Plans to Build More Bunkers Amid Fears of Russian Aggression,” by Alexander Smith and Vladimir Banic for NBC News.
“Sweden Plans to Build More Bunkers amid Fears of Russian Aggression,” written for The Economist.
“Judy Asks: Is Russia Europe’s Biggest Threat?” by Judy Dempsey for the Carnegie Europe.
“VTB chief warns of ‘growing threat’ of European Military Conflict,” by Andrei Kostin for the Financial Times.
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Russia Inks S-400 Deal with U.S. Ally…
India, an important U.S ally, could soon be in the crosshairs of U.S sanctions as a result of a $5 billion weapons deal it made with Russia. Indian Prime Minister Narendra Modi finalized the arrangement with Russian President Vladimir Putin during his recent two day visit to New Delhi. The deal allows India take to possession of a Russia’s high-tech S-400 missile defense system.
By making this deal India could be sanctioned by the U.S government under the Countering America's Adversaries Through Sanctions Act (CAATSA). This law, which was signed last August by U.S. President Donald Trump, was concocted to punish Russia for its "malign activities." A few weeks ago, the U.S used this law to impose sanctions on China for its acquisitions of Russian made-military gear. The Chinese and Russia deal included the purchase of the S-400.
The S400, as we discussed in issue #21 is a real game changer. It’s an upgrade of the Russian S300, a missile defense system that was already incredibly successful. The S-400 is also considered better than the U.S made Patriot missile, its closest direct competitor. However, the S-400 is a drastically better system, and outflanks the U.S product on every front. For starters, Patriots can spot airborne systems at 180km plus strike them at 130km, while the S400 can detect them at 600km and strike them at 400km. The minimum strike range for the Patriot stands at 10km, while the S400 minimum is 2km. The Patriot can hit moving targets at a speed of 7.920km, against the S400’s more impressive 17.280km. The S-400 can also travel to combat mode in 10 minutes, as opposed to the Patriot's 25 minutes. Finally, S-400 is also cheaper to make, and therefore has a lower price.
Is the U.S going to sanction India as a result of this deal?
The answer to this question is not as clear as it was with Beijing.
India is considered an important strategic ally of the U.S, and growing weapons purchaser of American-made defense goods. India is credited with being responsible for 10.3% of the global arms imports from 2000 to 2016, according to a report by London-based Royal Institute of International Affairs – Chatham House. Russia has dominance over the Indian market, as it currently provides 76% of that 10.3% share.
The U.S, however, has become India’s second largest weapons provider, and grown its deals from near zero to $15 billion since 2008. In 2017, American-weapons manufacturer Lockheed Martin, which already has longstanding defense partnerships with India’s Tata Group, even offered the possibility to move production of F-16 jets to India, if it they were granted a contract to supply the Indian air force with the aforementioned warplane. India like the U.S, also shares fears of Chinese expansion, and growing dominance. Both India and China share a border, have waged war against each other, and have had a number of border spats over the years.
China, unlike India, is considered a complete rival power to the U.S, and not a market where U.S weapons can be sold. CAATSA does in fact allow for exceptions to be made. However, by allowing India to have an exception, the U.S. could potentially lose strength. Opening for the possibility of further rifts in their current alliances, such as with Turkey.
"The CAATSA will appear a rather subjective sanction program if it only applies to some nations and not all," said Peter Layton, a fellow of the Australian think-tank Griffith Asia Institute, in an interview CNN. Further adding that the spat over military hardware will unlikely hinder other functioning parts of the India-American relationship. “It is important to note that other parts of the US-India relationship would not be impacted, simply the sale of advanced military aircraft."
There are others who are betting on a type of "waiver" due to India’s growing strategic importance.
"That's why they (U.S Congress) passed the waiver sanction. India will almost certainly come under that waiver because the United States understands that stakes with India are far too high to jeopardize relations," said Ajai Shukla a defense expert and former colonel of the Indian Army, in an interview with CNN.
It’s a tricky spot for all involved.
India might be aligned with the U.S in terms of China, but it’s still heavily dependent on Russia for weaponry. Russia is also, as we have discussed in prior issues, a reluctant ally of China. India would need years to properly replace all of its military equipment with non-Russian made weapons. The latter is something India cannot do due to the constant threat of war it has with neighboring Pakistan, and the border spats with China. It’s also not in its national interest to only rely on just one weapons supplier. If anything, it needs to diversify, and by continuing to slowly purchase more U.S and Israeli made weaponry, it is achieving this quite well. That being said, the development of its own defense industry is probably the best route it should take as growing power to be more at ease.
Russia appears to have won this round though.
Modi’s signature in this deal means that Russia is further consolidating its position as India’s weapons provider of choice. If the U.S does place sanctions, then it’s likely to push an ally further into Russia’s arms. Unless they are so draconian that India would somehow backs away from the deal. Again, this is unlikely because India has been deemed an important actor by the U.S. However, India is also needs a good relationship with Russia to maintain their large military, which is at all times in alert. Finally, the U.S needs to develop more effective non-sanction tools to not find itself in this position with fellow allies.
Read more:
“Sorry, Washington, India Can’t Be Scare Away From Russia,” by Kenneth Rapoza for Forbes.
“India Risks U.S. Sanctions Following $5 Billion Russia Defence Deal,” by Manveena Suri and Steve George for CNN.
“India Russia S-400 Missile Deal: All You Need to Know,” by The Times of India staff.
“Trends in International Arms Transfers - 2017,” by the Stockholm International Peace Institute.
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Can Russia Save Itself From the Mighty U.S Dollar?
How do you control a nation?
Is it by military intervention, politics or sowing social unrest?
No, the real way to control a nation is to control its economy and money supply. This is precisely what the U.S has been doing via the dollar. The mighty U.S dollar has enabled U.S governments to press sanctions against both states and corporations to do as they please. This can happen even if the parties involved are not carrying out their business within U.S borders. The reason for this is because most large government and business entities must conduct operations in U.S dollars.
Recently we have seen this with Turkey. Sanctions were imposed officially because of the arrest of Andrew Brunson, a U.S citizen and Christian pastor, currently in prison for espionage. However, the real reason behind these sanctions has been said to be Turkey’s purchasing of Russian military equipment. Currently, as stated above, India could be on the verge of being the next target for sanctions, as they have inked a deal with Russia to purchase a Russian missile system. India has stated it has no intention of backing down from the deal. Despite the fact the U.S sanctioned China after a very similar deal. This situation and the risk of sanctions has begun to aggravate many U.S allies. The U.S has stated that these sanctions are but a means to punish Russia for its actions, but some say it is a way of creating an unnatural monopoly.
Since the beginning of the year Russia has been cutting down its U.S currency reserves, to the point that it’s no longer considered a major investor. This trend has continued up until now.
This week, Russian President Vladimir Putin, backed a plan to ‘de-dollarize’ the Russian economy so as to be less prone to Western sanctions. The Kremlin announced that it would push for Russian companies doing business internationally to move away from U.S dollars. To instead transact in Rubles, Euros and Chinese Renmibi. This move is a response to statements made by U.S. senate, which has been contemplating a ban on Russian state lenders from transacting in U.S dollars. The plan equally urges Russian firms from delisting from foreign stock exchanges and to re-list in Russia. This move would be tedious and lengthy. The process for delisting takes time and money. The latter is particularly hard to come by based on the current weak state of the ruble.
To consider the possibility, of using a basket of currencies for international transactions on a non-US based financial system, like what the EU, China and Russia are currently developing to with Iran, is an interesting scenario.
Russia could take the lead by further fomenting similar partnerships with places like China. That being said, Russia would find it hard to convince its Western partners to trade in a currency other than the U.S dollar in the export segment, especially in energy. Russia also needs to have a stronger commercial presence in the world, and with strong U.S rivals to make this plan even somewhat feasible. The discussion of an alternative to the U.S dollar to encourage more free trade with less political risks is certainly worth contemplating though.
Read more:
"Russia Cuts Dollar, Euro share in Reserves, Lifts Weight of Gold," by Reuters staff.
"Putin Backs 'Dedollarization' Plan," by Max Seddon for the Financial Times.
"Can Russia Stop Using the U.S Dollar?" by Henry Foy for the Financial Times.
"Russia Missile Deal Puts India in U.S Sanctions Crosshairs," by Niharika Mandhana for the Wall Street Journal.
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