EU can cope with Russian retaliation - Financial Times

March 28, 2014 10:06 am

EU can cope with Russian retaliation, says trade official

http://www.ft.com/intl/cms/s/0/da0a2d32-b5cb-11e3-b40e-00144feabdc0.html?ftcamp=published_links%2Frss%2Fhome_us%2Ffeed%2F%2Fproduct&siteedition=intl#axzz2xFvrX6UW

By Christian Oliver and Shawn Donnan in Brussels

©EPA

Russian marines march at a military base in Sevastopol, Crimea, this week

Europe’s top trade official struck a defiant stance against Moscow on Thursday and argued that the EU would have a strong hand if the Crimea crisis descended into a broader economic showdown.

Karel De Gucht, the EU’s trade commissioner, said Europe had an array of weapons at its disposal including a long-awaited competition case against Gazprom, which can set restrictions on the Russian energy company’s ability to control supply routes and prices. “The idea that we are strangled by Russia is not true,” he told the Financial Times in an interview.

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More broadly, Mr De Gucht countered Vladimir Putin, Russia’s president, who has argued that wider sanctions would inflict equal pain on Russia and the 28-nation bloc. In fact, Russia’s financial dependence on energy exports made it especially vulnerable, the commissioner argued.

“If you owe a little bit of money to the bank and you cannot pay it, then you have a big problem. If you owe a lot of money to the bank, the bank is in trouble. That also applies to our relationship with Russia. I am not impressed by their position,” he said.

Mr De Gucht’s perspective on Europe’s ability to resist a greater stand-off with Russia is critical as he is one of the leading commissioners charged with weighing up the feasibility of deeper sanctions against Moscow, most likely to be imposed if Russian troops enter eastern or southern Ukraine.

The Belgian commissioner rejected the assertion that Europe, which imports 30 per cent of its gas from Russia, could only build up greater resilience slowly. “Sometimes, history can move very fast,” he said. “If they were trying to strangle us, we would of course call on the US for access to their gas, independently from a free trade agreement. That would be a hugely political factor.”

In depth

Crisis in Ukraine

Russia has annexed the southern Ukrainian peninsula of Crimea, raising fears of a return to the politics of the cold war

He argued that America’s increasing gas exports would pile greater pressure on Gazprom and added that a deal over Iran’s disputed nuclear programme could also open up the world’s second biggest gas reserves for export to Europe.

Although Gazprom is cutting prices in EU, the company paints a rosy picture of its prospects in Europe. Its market share rose to 30 per cent last year from 26 per cent in 2012 and Alexander Medvedev, the deputy chief executive, argues that trend is likely to continue.

But Mr De Gucht insisted Russia’s longer term prospects were more fragile because Europe was ramping up investment in infrastructure such as liquefied natural gas terminals and cross-border gas and electricity interconnectors, which allow countries to diversify their supplies.

In the event of a deeper Russian incursion in Ukraine, he said that the EU would have to take a snap political decision on how to divide the pain of sanctions between member states.

“That is the kind of decision you can only take when there’s the political need to do so but it’s obvious that if Russia were to proceed in the south and east of Ukraine that political need would exist [overnight].”

Angela Merkel, Germany’s chancellor, on Thursday added her voice to call for the EU to cut its energy dependence on Russia. “There will be a new approach to our overall energy policy.” In the EU there was a very high dependency on Russian oil and gas, with Germany being far from the most dependent, she said.

Globalization in Reverse - TIME

Globalization in Reverse

http://time.com/39880/globalization-in-reverse/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Rana Foroohar @RanaForoohar
 

March 27, 2014

     

What the world’s trade slowdown means for growth in the U.S.—and abroad

Recent conflicts everywhere from Ukraine to the Middle East and the South China Sea remind us (as Robert D. Kaplan wrote in TIME’s March 31 cover story) that geography still matters, even in a globalized age. Politically, the world is certainly not flat. New economic figures show how increasingly rocky our world is becoming economically too. Globalization is often defined as the free movement of goods, people and money across borders. Lately, all of those have come under threat–and not just because of sanctions limiting travel and the flow of money among Russia, the U.S. and Europe. Over the past two years, global trade growth has been lower than global GDP growth. It’s the first time that has happened since World War II, and it marks a turning point in the global economy, with sweeping implications for countries, companies and consumers.

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There are many reasons global trade is growing more slowly than it has in the past. Europe is still struggling to end its debt crisis, and emerging markets are expanding more slowly than they were. But one of the biggest factors is that the American economy is going through a profound shift: the U.S. is no longer the global consumer of last resort. As HSBC’s chief economist, Stephen King, pointed out in a recent research note, during postwar recoveries past, “the U.S. economy acted as a giant sponge,” absorbing excess goods and services produced by the rest of the world. Booms would bust; markets would crash and recover. And whenever they did, you could be sure that Americans would start spending again, and eventually our trade deficit–the level by which imports exceed exports–would grow. That’s now changing. After nearly five years of recovery, the U.S. trade deficit isn’t growing but shrinking. In fact, it was down by about 12% from 2012 to 2013.

That’s not necessarily a bad thing for us. Part of the reason the deficit is shrinking is that our shale-oil and gas boom means we are buying less foreign fossil fuel, and our manufacturing sector is growing. But part of it is that wages haven’t come up since the crisis, and consumer spending is still sluggish. In order for the U.S. and the world economy to keep growing, somebody has to shell out for the electronics, cars and other goods we used to buy more of.

Unfortunately, no one is doing that. Europeans, still stuck in a debt crisis, probably won’t spend again for another five years. Emerging-economy countries, in various levels of turmoil, are growing at roughly half the rate they did precrisis. The Chinese, who picked up a lot of the global-spending slack after the financial reckoning of 2008, are now in the midst of a financial crisis of their own. Japan did its bit last year, but Abenomics–the government’s plan to encourage spending, named for Prime Minister Shinzo Abe–is running out of steam. Everywhere, says Mohamed El-Erian, chief economic adviser to insurance giant Allianz, “there is a mismatch between the will and the wallet to spend.”

With global economic integration seemingly in reverse, at least for the moment, many economists and trade experts are beginning to talk about a new era of deglobalization, during which countries turn inward. Some of the implications are worrisome. Complaints to the World Trade Organization about protectionism, intellectual-property theft and new trade barriers are rising. Trade talks themselves are no longer global but regional and local, threatening to create a destructive so-called spaghetti bowl of competing economic alliances.

Yet deglobalization isn’t necessarily all bad. As U.S. Trade Representative Michael Froman said at an economic summit in Washington recently, it also “means companies are looking at their extended value chains, supply chains, and deciding whether they want to move some production back to their home country.” That’s already happened in the U.S. A study by the Boston Consulting Group found that 21% of all manufacturing firms in the U.S. with $1 billion or more in sales are actively reshoring, and 54% say they are considering it.

Whether or not those jobs will help boost wages is something the Federal Reserve will be watching carefully. One of the hallmarks of the past 30 years of globalization was an easy-money environment. As Fed Chair Janet Yellen indicated at her latest press conference, we are coming to the end of that era. In this new economic age, not all boats will rise equally or smoothly. Markets, which had more or less converged for the past 30 years, will start diverging along national and sectoral lines. Our economic landscape, like our political one, will become more volatile and less predictable. Get ready for a bumpy ride.

3 Presidents and a Riddle Named Putin - New York Times

3 Presidents and a Riddle Named Putin

http://www.nytimes.com/2014/03/24/world/europe/3-presidents-and-a-riddle-named-putin.html?emc=edit_th_20140324&nl=todaysheadlines&nlid=56381892&_r=0

By PETER BAKERMARCH 23, 2014

WASHINGTON — Bill Clinton found him to be cold and worrisome, but predicted he would be a tough and able leader. George W. Bush wanted to make him a friend and partner in the war on terror, but grew disillusioned over time.

Barack Obama tried working around him by building up his protégé in the Kremlin, an approach that worked for a time but steadily deteriorated to the point that relations between Russia and the United States are now at their worst point since the end of the Cold War.

For 15 years, Vladimir V. Putin has confounded American presidents as they tried to figure him out, only to misjudge him time and again. He has defied their assumptions and rebuffed their efforts at friendship. He has argued with them, lectured them, misled them, accused them, kept them waiting, kept them guessing, betrayed them and felt betrayed by them.

Each of the three presidents tried in his own way to forge a historic if elusive new relationship with Russia, only to find their efforts torpedoed by the wiry martial arts master and former K.G.B. colonel. They imagined him to be something he was not or assumed they could manage a man who refuses to be managed. They saw him through their own lens, believing he viewed Russia’s interests as they thought he should. And they underestimated his deep sense of grievance.

Photo

President Vladimir V. Putin of Russia in the Kremlin on Friday, where he signed legislation completing the annexation of Crimea.CreditSergei Chirikov/Agence France-Presse — Getty Images

To the extent that there were any illusions left in Washington, and it is hard to imagine there were by this point, they were finally and irrevocably shattered by Mr. Putin’s takeover of Crimea and the exchange of sanctions that has followed. As Russian forces now mass on the Ukrainian border, the debate has now shifted from how to work with Mr. Putin to how to counter him.

“He’s declared himself,” said Tom Donilon, President Obama’s former national security adviser. “That’s who you have to deal with. Trying to wish it away is not a policy.”

Looking back now, aides to all three presidents offer roughly similar takes: Their man was hardly naïve about Mr. Putin and saw him for what he was, but felt there was little choice other than to try to establish a better relationship. It may be that some of their policies hurt the chances of that by fueling Mr. Putin’s discontent, whether it was NATO expansion, the Iraq war or the Libya war, but in the end, they said, they were dealing with a Russian leader fundamentally at odds with the West.

“I know there’s been some criticism on, was the reset ill advised?” said Mr. Donilon, using the Obama administration’s term for its policy. “No, the reset wasn’t ill advised. The reset resulted in direct accomplishments that were in the interests of the United States.”

Some specialists said Mr. Obama and his two predecessors saw what they wanted to see. “The West has focused on the notion that Putin is a pragmatic realist who will cooperate with us whenever there are sufficient common interests,” said James M. Goldgeier, dean of international studies at American University. “We let that belief overshadow his stated goal of revising a post-Cold War settlement in which Moscow lost control over significant territory and watched as the West expanded its domain.”

Continue reading the main story

Presidents tend to think of autocrats like Mr. Putin as fellow statesmen, said Dennis Blair, Mr. Obama’s first director of national intelligence. “They should think of dictators like they think of domestic politicians of the other party,” he said, “opponents who smile on occasion when it suits their purposes, and cooperate when it is to their advantage, but who are at heart trying to push the U.S. out of power, will kneecap the United States if they get the chance and will only go along if the U.S. has more power than they.”

Eric S. Edelman, who was undersecretary of defense under Mr. Bush, said American leaders overestimated their ability to assuage Mr. Putin’s anger about the West. “There has been a persistent tendency on the part of U.S. presidents and Western leaders more broadly to see the sense of grievance as a background condition that could be modulated by consideration of Russian national interests,” he said. “In fact, those efforts have been invariably taken as weakness.”

After 15 years, no one in Washington still thinks of Mr. Putin as a partner. “He goes to bed at night thinking of Peter the Great and he wakes up thinking of Stalin,” Representative Mike Rogers, the Republican chairman of the House intelligence committee, said on “Meet the Press” on NBC on Sunday. “We need to understand who he is and what he wants. It may not fit with what we believe of the 21st century.”

Bush’s Disillusionment

Mr. Clinton was the first president to encounter Mr. Putin, although they did not overlap for long. He had spent much of his presidency building a strong relationship with President Boris N. Yeltsin, Mr. Putin’s predecessor, and gave the benefit of the doubt to the handpicked successor who became Russia’s prime minister in 1999 and president on New Year’s Eve.

“I came away from the meeting believing Yeltsin had picked a successor who had the skills and capacity for hard work necessary to manage Russia’s turbulent political and economic life better than Yeltsin now could, given his health problems,” Mr. Clinton wrote in his memoir. When Mr. Putin’s selection was ratified in a March 2000 election, Mr. Clinton called to congratulate him and, as he later wrote, “hung up the phone thinking he was tough enough to hold Russia together.”

Mr. Clinton had his worries, though, particularly as Mr. Putin waged a brutal war in the separatist republic of Chechnya and cracked down on independent media. He privately urged Mr. Yeltsin to watch over his successor. Mr. Clinton also felt brushed off by Mr. Putin, who seemed uninterested in doing business with a departing American president.

But the prevailing attitude at the time was that Mr. Putin was a modernizer who could consolidate the raw form of democracy and capitalism that Mr. Yeltsin had introduced to Russia. He moved early to overhaul the country’s tax, land and judicial codes. As Strobe Talbott, Mr. Clinton’s deputy secretary of state, put it in his book on that period, George F. Kennan, the noted Kremlinologist, thought that Mr. Putin “was young enough, adroit enough and realistic enough to understand that Russia’s ongoing transition required that he not just co-opt the power structure, but to transform it.”

Mr. Bush came to office skeptical of Mr. Putin, privately calling him “one cold dude,” but bonded with him during their first meeting in Slovenia in June 2001, after which he made his now-famous comment about looking into the Russian’s soul. Mr. Putin had made a connection with the religious Mr. Bush by telling him a story about a cross that his mother had given him and how it was the only thing that survived a fire at his country house.

Putin, in the Words of U.S. Officials

President Bill Clinton

"I called to congratulate him and hung up the phone thinking he was tough enough to hold Russia together and hoping he was wise enough to find an honorable way out of the Chechnya problem and committed enough to democracy to preserve it."
— Writing in “My Life” about Vladimir Putin’s election in March 2000

Vice President Dick Cheney

"I think K.G.B., K.G.B., K.G.B."
— On his impression of Mr. Putin, in private conversations in 2001

President George W. Bush

"I looked the man in the eye. I found him to be very straightforward and trustworthy. We had a very good dialogue. I was able to get a sense of his soul."
— After first meeting with Mr. Putin in June 2001

"He’s not well-informed. It’s like arguing with an eighth-grader with his facts wrong."
— Mr. Bush, to the visiting prime minister of Denmark in June 2006.

Robert M. Gates

"I had looked into Putin’s eyes and, just as I expected, had seen a stone-cold killer."
— The defense secretary for Mr. Bush and President Obama, writing in “Duty” about his meeting with Mr. Putin in February 2007

President Obama

"I don’t have a bad personal relationship with Putin. When we have conversations, they’re candid, they’re blunt, oftentimes they’re constructive. I know the press likes to focus on body language and he’s got that kind of slouch, looking like the bored kid in the back of the classroom."
— In a news conference in August 2013

Not everyone was convinced. Mr. Bush’s vice president, Dick Cheney, privately told people at the time that when he saw Mr. Putin, “I think K.G.B., K.G.B., K.G.B.” But Mr. Bush was determined to erase the historical divide and courted Mr. Putin during the Russian leader’s visits to Camp David and Mr. Bush’s Texas ranch.

Mr. Putin liked to brag that he was the first foreign leader to call Mr. Bush after the attacks of Sept. 11, 2001, and he permitted American troops into Central Asia as a base of operations against Afghanistan.

But Mr. Putin never felt Mr. Bush delivered in return and the relationship strained over the Iraq War and the Kremlin’s accelerating crackdown on dissent at home. By Mr. Bush’s second term, the two were quarreling over Russian democracy, reaching a peak during a testy meeting in Slovakia in 2005.

“It was like junior high debating,” Mr. Bush complained later to Britain’s Prime Minister Tony Blair, according to notes of the conversation. Mr. Putin kept throwing Mr. Bush’s arguments back at him. “I sat there for an hour and 45 minutes and it went on and on,” Mr. Bush said. “At one point, the interpreter made me so mad that I nearly reached over the table and slapped the hell out of the guy. He had a mocking tone, making accusations about America.”

He was even more frustrated by Mr. Putin a year later. “He’s not well-informed,” Bush told the visiting prime minister of Denmark in 2006. “It’s like arguing with an eighth-grader with his facts wrong.”

He told another visiting leader a few weeks later that he was losing hope of bringing Mr. Putin around. “I think Putin is not a democrat anymore,” he said. “He’s a czar. I think we’ve lost him.”

‘A Stone-Cold Killer’

But Mr. Bush was reluctant to give up, even if those around him no longer saw the opportunity he saw. His new defense secretary, Robert M. Gates, came back from his first meeting with Mr. Putin and told colleagues that unlike Mr. Bush, he had “looked into Putin’s eyes and, just as I expected, had seen a stone-cold killer.”

In the spring of 2008, Mr. Bush put Ukraine and Georgia on the road to NATO membership, which divided the alliance and infuriated Mr. Putin. By August of that year, the two leaders were in Beijing for the Summer Olympics when word arrived that Russian troops were marching into Georgia.

Mr. Bush in his memoir recalled confronting Mr. Putin, scolding him for being provoked by Mikheil Saakashvili, then Georgia’s anti-Moscow president.

“I’ve been warning you Saakashvili is hot-blooded,” Mr. Bush told Mr. Putin.

“I’m hot-blooded too,” Mr. Putin said.

“No, Vladimir,” Mr. Bush responded. “You’re coldblooded.”

Yes, comparison's to Hitler are premature. However, more than four generations after WWII it is wise for Americans to educate themselves on...

Sups

 Yesterday

The misread of Putin in the West is shocking. So much wishful thinking, in place of cold realism and objectivity! I am no expert, but here's...

ca

 Yesterday

i will assume putin was a competent KGB agent...isn't it interesting that he made a move on crimea when he knows the U.S. is tired of war......

• 
  

Mr. Bush responded to the Georgia war by sending humanitarian aid to Georgia, transporting its troops home from Iraq, sending an American warship to the region and shelving a civilian nuclear agreement with Russia.

Photo

Putin has rebuffed overtures from the West since taking office.CreditAlexei Druzhinin/RIA Novosti Kremlin, via Associated Press

Worried that Crimea might be next, Mr. Bush succeeded in stopping Russia from swallowing up Georgia altogether. But on the eve of the collapse of Lehman Brothers and the global financial meltdown, he did not impose the sort of sanctions that Mr. Obama is now applying.

“We and the Europeans threw the relationship into the toilet at the end of 2008,” Stephen J. Hadley, Mr. Bush’s national security adviser, recalled last week. “We wanted to send the message that strategically this was not acceptable. Now in retrospect, we probably should have done more like economic sanctions.”

If Mr. Bush did not take the strongest punitive actions possible, his successor soon made the point moot. Taking office just months later, Mr. Obama decided to end any isolation of Russia because of Georgia in favor of rebuilding relations. Unlike his predecessors, he would try to forge a relationship not by befriending Mr. Putin but by bypassing him.

Ostensibly complying with Russia’s two-term constitutional limit, Mr. Putin had stepped down as president and installed his aide, Dmitri A. Medvedev, in his place, while taking over as prime minister himself. So Mr. Obama decided to treat Mr. Medvedev as if he really were the leader.

A diplomatic cable obtained by WikiLeaks later captured the strategy in summing up similar French priorities: “Cultivating relations with Russian President Dmitri Medvedev, in the hope that he can become a leader independent of Vladimir Putin.”

Before his first trip to Moscow, Mr. Obama publicly dismissed Mr. Putin as having “one foot in the old ways of doing business” and pumped up Mr. Medvedev as a new-generation leader. Mr. Obama’s inaugural meeting with Mr. Putin a few days later featured a classic tirade by the Russian about all the ways that the United States had mistreated Moscow.

Among those skeptical of Mr. Obama’s strategy were Mr. Gates, who stayed on as defense secretary, and Hillary Rodham Clinton, the new secretary of state. Like Mr. Gates, Mrs. Clinton was deeply suspicious of Mr. Putin. In private, she mockingly imitated his man’s-man, legs-spread-wide posture during their meetings. But even if they did not assign it much chance of success, she and Mr. Gates both agreed the policy was worth trying and she gamely presented her Russian counterpart with a “reset” button, remembered largely for its mistaken Russian translation.

Obama’s ‘Reset’ Gambit

For a time, Mr. Obama’s gamble on Mr. Medvedev seemed to be working. They revived Mr. Bush’s civilian nuclear agreement, signed a nuclear arms treaty, sealed an agreement allowing American troops to fly through Russian airspace en route to Afghanistan and collaborated on sanctions against Iran. But Mr. Putin was not to be ignored and by 2012 returned to the presidency, sidelining Mr. Medvedev and making clear that he would not let Mr. Obama roll over him.

Mr. Putin ignored Mr. Obama’s efforts to start new nuclear arms talks and gave asylum to Edward J. Snowden, the national security leaker. Mr. Obama canceled a trip to Moscow, making clear that he had no personal connection with Mr. Putin. The Russian leader has a “kind of slouch” that made him look “like that bored schoolboy in the back of the classroom,” Mr. Obama noted.

In the end, Mr. Obama did not see how the pro-Western revolution in Ukraine that toppled a Moscow ally last month would look through Mr. Putin’s eyes, said several Russia specialists. “With no meaningful rapport or trust between Obama and Putin, it’s nearly impossible to use high-level phone calls for actual problem solving,” said Andrew Weiss, a former Russia adviser to Mr. Clinton and now a vice president at the Carnegie Endowment for International Peace. “Instead, it looks like we’re mostly posturing and talking past each other.”

As Mr. Obama has tried to figure out what to do to end the crisis over Ukraine, he has reached out to other leaders who still have a relationship with Mr. Putin, including Angela Merkel, the German chancellor. She privately told Mr. Obama that after speaking with Mr. Putin she thought he was “in another world.” Secretary of State John Kerry later said publicly that Mr. Putin’s speech on Crimea did not “jibe with reality.”

That has sparked a debate in Washington: Has Mr. Putin changed over the last 15 years and become unhinged in some way, or does he simply see the world in starkly different terms than the West does, terms that make it hard if not impossible to find common ground?

“He’s not delusional, but he’s inhabiting a Russia of the past — a version of the past that he has created,” said Fiona Hill, the top intelligence officer on Russia during Mr. Bush’s presidency and co-author of “Mr. Putin: Operative in the Kremlin.” “His present is defined by it and there is no coherent vision of the future. Where exactly does he go from here beyond reasserting and regaining influence over territories and people? Then what?”

That is the question this president, and likely the next one, will be asking for some time to come.

Sanctions? Russia Is Just Going to Shrug Them Off - TIME

Sanctions? Russia Is Just Going to Shrug Them Off

http://time.com/36614/russia-will-shrug-off-crimea-sanctions/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Michael Schuman @MichaelSchuman
 

    

An electronic board displays a rising stock index curve at the Russian Micex Stock Exchange in Moscow the day after the Crimean referendum on independence from Ukraine March 17, 2014.Bloomberg—Bloomberg via Getty Images

Russian president Vladimir Putin sees his country’s economic future in the East, not the West.

You’d think that the U.S. and Europe could apply some pretty heavy economic pressure on Russia. After all, the European Union is Russia’s largest trading partner and source of foreign investment, and right now, the country can ill afford any threat to that economic lifeline. The Russian economy, a member of the once high-flying BRICs, clocked meager 1.3% growth in 2013.

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But as the U.S. and E.U. begin to impose economic sanctions on Russia over its grab of Crimea from Ukraine, Putin hasn’t blinked. Perhaps he assumes sanctions from the West will only cut so deep. With Europe as reliant on Russia – for its oil and gas – as Russia is on Europe, Putin has some economic leverage of his own.

And there may be another reason why Putin is unmoved by Western economic sanctions. His gaze has turned East.

Just as U.S. President Barack Obama has been trying to engineer a “pivot” to Asia, so has Putin. And why not? Tying his country’s future to a rapidly expanding Asia instead of a debt-ridden and slow-moving Europe makes perfect sense. In the East, Putin can find eager consumers for Russian raw materials, like China – without the hectoring on human rights he receives from the West. Putin has been signaling this shift to Asia for some time. “We view this dynamic region as the most important factor for the successful future of the whole country, as well as development of Siberia and the far east,”Putin wrote in the Wall Street Journal in 2012.

Putin has been making some progress. In the 1990s, trade between China and Russia was practically nonexistent. Not anymore. According to Asian Development Bank data, total trade between China and Russia increased from $5.5 billion in 1995 to over $88 billion in 2012. The two are cooperating on investment as well. In 2012, Beijing and Moscow formed the Russia-China Investment Fund, a multi-billion-dollar pool of money aimed at investing in projects to enhance economic ties between them. To smooth the flow of people and products between Russia and East Asia, Moscow is undertaking a major upgrade of the Trans-Siberian Railroad, which, Putin said in a recent speech, “will act as a key artery between Europe and the Asia-Pacific region.”

Of course, China and its neighbors are no replacement for Europe, at least not yet. Nearly 80% of Russian crude exports heads to Europe, compared to only 18% to Asia, according to the U.S. Energy Information Administration. But that’s set to change. Igor Shuvalov, Russia’s First Deputy Prime Minister, predicted last year that the country’s trade with Asia would surpass that with Europe over the next five to 10 years. Russia, for instance, has pledged to more than triple the quantity of oil it ships to China annually. In 2013, Russian oil giant Rosneft inked a deal to ship $270 billion of oil to China over the next quarter century. China is also becoming a source of investment. State-owned China National Petroleum Corp. agreed last year to take a stake in a Russian liquefied natural gas project. In 2013, the China Investment Corp., Beijing’s sovereign wealth fund, pledged to up its investments in Siberia.

All of these plans and goals are easier to talk about than achieve, however. Russia has long held on-again, off-again dreams of becoming an Asian power. In the 19th century, the Tsars tried — and failed — to build a massive empire across the northern Pacific stretching from Siberia to California. Today, Russia still plays a minor role in East Asian trade, and the country cannot automatically redirect its exports from Europe to Asia. It isn’t clear, furthermore, how Russia’s oil industry will be able to satisfy its commitments to China. “Unfortunately for Putin, Moscow has limited capacity to make its pivot dreams a reality,” analysts Fiona Hill and Bobo Lo commented.

Still, Putin’s Asia dreams lay bare an uncomfortable truth facing Washington and Brussels and they attempt to resolve the Ukraine crisis. In the new world order, with varied centers of economic power, the West cannot isolate Russia. There’s always someone else ready to ignore politics and do business.

Ukraine crisis: Could Trans-Dniester be next? - BBC NEWS

Ukraine crisis: Could Trans-Dniester be next?

http://www.bbc.com/news/world-europe-26662721

By Humphrey HawksleyBBC News, Tiraspol

Ukraine crisis

• 
  

Russia's annexation of Crimea has led some to wonder whether any other former Soviet countries could follow. The separatist region of Trans-Dniester has already offered itself to Moscow - a request which Russia has promised to consider.

"It's been getting much worse in the past few months," said a mother of two who didn't want to give her real name and called herself Anna.

"They have closed, let me see...." she counts on her fingers. "Eight blogging sites. The secret police are so active now."

We were having coffee in the centre of Tiraspol, capital of the tiny, unrecognised state of Trans-Dniester that lives in a time-warped other age.

Teams of workers tend street flowerbeds. A statue of Lenin stands in the main square and a red and green national flag with a small yellow hammer a sickle in the corner flies from the roof of an ugly parliament building - known as the Supreme Soviet.

"It's confusing," says Anna. "If I had a choice, I would choose Europe. But a lot of things are better here. There are more opportunities in Russia. Salaries are about the same, but our pensions are much higher - about $180 (£109) a month compared to $75 in Moldova." She smiles. "And our gas is much, much cheaper."

This week the Supreme Soviet sent an official request to Moscow asking if - given Crimea - Trans-Dniester could be allowed to join the Russian Federation. But there's been no celebration and barely an announcement.

Outside, one couple had not heard and when told, the man shrugged and walked on - wary, it seemed, of talking to a foreigner.

Across the wide October 25th Boulevard, a strong wind from the River Dniester scattered flowers laid at a memorial to those killed in recent wars.

Each name is listed on a black stone wall, including more than 800 killed in 1992 when Trans-Dniester, backed by Russia, fought to stop the tiny country of Moldova from becoming independent from a disintegrating Soviet Union.

It mostly failed. A ceasefire created this strip of land wedged between Ukraine and Moldova, that has become what's described as a "frozen conflict".

Trans-Dniester is home to about 300,000 people who live amid a drab and arid agricultural landscape, peppered with checkpoints run by Russian peacekeeping troops. The same soldiers also keep watch over immigration posts on the Moldovan border. More than a thousand are based here.

Fighting between pro-Russians (above) and Moldovan forces in 1992 left hundreds of civilians dead

One of the few tourist attractions is a museum in the old headquarters of a swashbuckling Red Army General Grigory Kotovsky, who held sway over Tiraspol in the 1920s.

"He is magnificent like the Soviet Union," says the curator Nadejda Kostiurina, holding up a Soviet flag underneath his portrait. "That was much, much better than we have now."

She has been watching Russian television on the Crimea crisis and when asked about it says bluntly: "I hope the European Union has enough brains not to start a war. I don't understand why it wants to more bloodshed."

Compared with the ordered tranquillity of Tiraspol, where street lamps are polished and curb sides painted, the Moldovan capital of Chisinau carries the muddle of a new market democracy - pot holed roads, chaotic traffic, and luxury car showrooms blending together in Europe's poorest country.

Its beacon is membership of the European Union, but now, for many here, there's a new fear that Russia will try to stop that by moving on Trans-Dniester - and, therefore, Moldova.

"If Putin will continue in Ukraine, particularly along the Black Sea until Odessa with its connection to Trans-Dniester we could see a very sad scenario," says Oazu Nantoi a political veteran of the Soviet collapse. "If he can be stopped in Crimea, then we have a chance to survive."

A sign in Trans-Dniester reminds people: "We are not Moldova!"

In recent weeks, more Moldovans have been switching to Russian television channels because, according to analysts, it's what they trust in times of crisis. This is creating a new challenge by pitting the bullish Vladimir Putin against Moldova's urbane and cautious prime minister, Iurie Leanca.

"Putin is the most popular political leader in Moldova," remarks a newspaper vendor in central Chisinau, reflecting the view of the still powerful Moldovan communist party.

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Trans-Dniester

• A narrow strip of land between the Dniester river and the Ukrainian border
• Proclaimed independence from Moldova in 1990
• The international community does not recognise its self-declared statehood

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Mr Leanca accuses his opponents of using propaganda to poison the minds of voters, but he admits that such sentiment has added resolve and speed to his policies.

He wants to sign an EU Association Agreement - similar to the one that sparked the protests in Ukraine - as soon as practicable. He has set himself an optimistic target of 2019 to join the European Union. He also wants to consolidate Moldova's position as a Nato ally, despite its official policy of being militarily neutral.

Yet, as a graduate of one of Moscow's elite universities for diplomats, Mr Leanca believes he has a feel for how far he could go with a head-to-head confrontation against the power of Russia.

"My own experience is that you have to have a very good and intense dialogue with Russia and the more you discuss the more you will see progress," he says.

"If the Ukrainians think this is a good lesson we would be willing to share it because in our situations there is no alternative to dialogue."

Obama’s Test: Can Penalties Change Russia’s Course? - New York Times

Obama’s Test: Can Penalties Change Russia’s Course?

http://www.nytimes.com/2014/03/19/world/europe/obamas-test-can-penalties-change-russias-course.html?emc=edit_cn_20140318&nl=us&nlid=56381892&_r=0

By PETER BAKERMARCH 18, 2014

WASHINGTON — After Russia invaded Crimea, a senior American official vowed to “make it hurt.” More than two weeks later, Moscow has given no sign that it feels any pain, and the challenge for President Obama is whether he is willing or able to inflict enough to change the Kremlin’s calculus.

When President Vladimir V. Putin signed an annexation treaty on Tuesday, he essentially laughed off the modest sanctions imposed so far by the United States and Europe, all but guaranteeing that Mr. Obama and his allies will follow up with another round. “More is coming,” Jay Carney, the White House spokesman, said after the Moscow ceremony.

But it remained unclear just how much more, not just in the next 24 hours, but in the longer run.

Mr. Obama’s critics and even some supporters were surprised and disappointed that the financial sanctions he imposed on Monday were applied to only 11 Russian and Ukrainian figures who were unlikely to have many assets to freeze in the United States. The president quickly came under pressure from both sides of the aisle on Tuesday to be more assertive.

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As President Putin announces the annexation of Crimea, a look at the geopolitical costs and how China is closely watching the situation.

“Putin has dramatically escalated this crisis by taking the decision to annex Crimea,” said Michael McFaul, who was Mr. Obama’s ambassador in Moscow until a couple of weeks ago. “The Obama administration must respond and expand the list of sanctioned individuals well beyond what was announced yesterday.”

David J. Kramer, an assistant secretary of state under President George W. Bush and now the president of Freedom House, a Washington-based advocacy group, said sanctions should target the most senior officials in Moscow, Russian banks and state-owned enterprises, and eventually Mr. Putin himself.

“Until Putin and his circle pay a real price for their actions — and I think the U.S. and E.U. can impose such a price — the Kremlin won’t see a reason to stop,” Mr. Kramer said.

Senior administration officials said they were trying to stage their response, starting relatively modestly to make the point that their punitive actions can grow much more damaging if Mr. Putin does not reverse course. They had hoped that their approach would allow room for Mr. Putin to stop short of actual annexation after a Russian-supported referendum in Crimea on Sunday, a hope that has now proved unfounded.

Realistically, American officials recognize that there is now little chance of prying Crimea out of Moscow’s hands, although that is not something they will admit publicly. Instead, the goal is to make Mr. Putin at least pay a price for Crimea and to deter him from escalating the crisis by further destabilizing the largely Russian-speaking eastern Ukraine or even trying to take control of parts of it outright.

After the annexation treaty signing on Tuesday, the United States and six other industrial powers that belong to the Group of 8 with Russia all but signaled that they will throw it out of the organization. Instead of traveling to Sochi in June, where Mr. Putin was scheduled to host this year’s G-8 meeting, Mr. Obama invited leaders of the rest of the group, reconstituting themselves as the G-7, to meet in The Hague to talk about Ukraine next week on the sidelines of a previously scheduled nuclear summit meeting.

U.S. Imposes New Sanctions on Russia

President Obama announced sanctions aimed at President Vladimir V. Putin’s inner circle.

Mr. Carney said the United States would also expand its sanctions, and noted that the geopolitical uncertainty had already taken a toll on Russia’s currency and markets. “I wouldn’t if I were you invest in Russian equities right now unless you’re going short,” he said.

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And yet world markets rose on Tuesday after Mr. Putin’s speech and action, either shrugging off the crisis or interpreting his reassurance that he did not want to split Ukraine as a signal that he would be satisfied after taking Crimea. The ruble, bolstered by Russia’s central bank, backed off the record lows it had fallen to in recent days.

Either way, Mr. Obama was left on the defensive against critics who said he was not being strong enough. Mitt Romney, his Republican challenger in the 2012 election, said Tuesday that Mr. Obama and his team waited too long to project strength and prepare possible punishments before Mr. Putin sent troops into Crimea. “Part of their failure, I submit, is due to their failure to act when action was possible, and needed,” Mr. Romney wrote in The Wall Street Journal.

Mr. Carney said it was “preposterous” and “provably wrong” to suggest, as other critics have, that the president sent a signal of weakness that emboldened Mr. Putin after failing to follow through on threats to retaliate against Syria last year for a chemical weapons attack on civilians. Mr. Carney went on to note that Mr. Bush’s willingness to invade Iraq “didn’t seem to affect Russia’s calculations when it came to its actions in Georgia” in 2008.

Mr. Obama has given himself more tools to use against Russia, if he chooses to do so. An executive order he signed on Monday authorizes sanctions against not just Russian government officials but also the Russian arms industry and Russian oligarchs who support Mr. Putin’s rule.

One Russian who has been on some lists of possible targets circulated in Washington and Brussels is Igor Sechin, a longtime Putin adviser who is now the president of Rosneft, the state oil company.

Rosneft is deeply entwined in a variety of projects with ExxonMobil, including a joint venture signed in December to develop oil reserves in Siberia. If Mr. Sechin is barred from traveling to the United States and has his personal assets frozen, current and former government officials said that could put the partnership between the oil companies in real jeopardy.

Republicans in Washington are also pushing Mr. Obama to be more assertive to break Russia’s energy grip over Ukraine and Europe. “If we are serious about challenging Putin’s aggression,” said Representative Ed Royce, Republican of California, the chairman of the House Foreign Affairs Committee, “the U.S. and our European allies should make an all-out effort to break that grip.”

Putin Reclaims Crimea for Russia and Bitterly Denounces the West - New York Times

Putin Reclaims Crimea for Russia and Bitterly Denounces the West

http://www.nytimes.com/2014/03/19/world/europe/ukraine.html?emc=edit_th_20140319&nl=todaysheadlines&nlid=56381892

By STEVEN LEE MYERS and ELLEN BARRYMARCH 18, 2014

People in Simferopol, Crimea, watched an address by President Vladimir V. Putin of Russia on Tuesday. CreditDan Kitwood/Getty Images

MOSCOW — President Vladimir V. Putin reclaimed Crimea as a part of Russia on Tuesday, reversing what he described as a historic injustice inflicted by the Soviet Union 60 years ago and brushing aside international condemnation that could leave Russia isolated for years to come.

In an emotional address steeped in years of resentment and bitterness at perceived slights from the West, Mr. Putin made it clear that Russia’s patience for post-Cold War accommodation, much diminished of late, had finally been exhausted. Speaking to the country’s political elite in the Grand Kremlin Palace, he said he did not seek to divide Ukraine any further, but he vowed to protect Russia’s interests there from what he described as Western actions that had left Russia feeling cornered.

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RELATED COVERAGE

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“Crimea has always been an integral part of Russia in the hearts and minds of people,” Mr. Putin declared in his address, delivered in the chandeliered St. George’s Hall before hundreds of members of Parliament, governors and others. His remarks, which lasted 47 minutes, were interrupted repeatedly by thunderous applause, standing ovations and at the end chants of “Russia, Russia.” Some in the audience wiped tears from their eyes.

Photo

Russians gathered in Red Square under banners hailing President Vladimir V. Putin for his moves to restore Crimea to Russia. CreditJames Hill for The New York Times

A theme coursing throughout his remarks was the restoration of Russia after a period of humiliation following the Soviet collapse, which he has famously called “the greatest geopolitical catastrophe of the 20th century.”

He denounced what he called the global domination of one superpower and its allies that emerged. “They cheated us again and again, made decisions behind our back, presenting us with completed facts,” he said. “That’s the way it was with the expansion of NATO in the East, with the deployment of military infrastructure at our borders. They always told us the same thing: ‘Well, this doesn’t involve you.’ ”

The speed of Mr. Putin’s annexation of Crimea, redrawing an international border that has been recognized as part of an independent Ukraine for 23 years, has been breathtaking and so far apparently unstoppable.

While his actions, which the United States, Europe and Ukraine do not recognize, provoked renewed denunciations and threats of tougher sanctions and diplomatic isolation, it remained unclear how far the West was willing to go to punish Mr. Putin. The leaders of what had been the Group of 8 nations announced they would meet next week as the Group of 7, excluding Russia from a club Russia once desperately craved to join.

Certainly the sanctions imposed on Russia ahead of Tuesday’s steps did nothing to dissuade Mr. Putin, as he rushed to make a claim to Crimea that he argued conformed to international law and precedent. In his remarks he made clear that Russia was prepared to withstand worse punishment in the name of restoring a lost part of the country’s historic empire, effectively daring world leaders to sever political or economic ties and risk the consequences to their own economies.

Mr. Putin, the country’s paramount leader for more than 14 years, appeared to be gambling that the outrage would eventually pass, as it did after Russia’s war with Georgia in 2008, because a newly assertive Russia would be simply too important to ignore on the world stage. As with any gamble, though, the annexation of Crimea carries potentially grave risks.

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Only hours after Mr. Putin declared that “not a single shot” had been fired in the military intervention in Crimea, a group of soldiers opened fire as they stormed a Ukrainian military mapping office near Simferopol, killing a Ukrainian soldier and wounding another, according to a Ukrainian officer inside the base and a statement by Ukraine’s Defense Ministry.

Photo

Near Simferopol, Crimea, women watched at lunchtime as Mr. Putin addressed legislators and other officials in Moscow on Tuesday. CreditYuri Kochetkov/European Pressphoto Agency

The base appeared to be under the control of the attacking soldiers, who like most of the Russians in Crimea wore no insignia, and the ministry said that Ukrainian forces in Crimea were now authorized to use force to defend themselves.

The episode underscored the fact that the fate of hundreds of Ukrainian soldiers, as well military bases and ships, remains dangerously unresolved.

In the capital, Kiev, Ukraine’s new prime minister, Arseniy P. Yatsenyuk, declared that the conflict had moved from “a political to a military phase” and laid the blame squarely on Russia.

Mr. Putin’s determined response to the ouster of Ukraine’s president, Viktor F. Yanukovych, last month has left American and European leaders scrambling to find an adequate response after initially clinging to the hope that Mr. Putin was prepared to find a political solution — or “off ramp” — to an escalating crisis that began with the collapse of Mr. Yanukovych’s government on the night of Feb. 21.

Within a week, Russian special operations troops had seized control of strategic locations across Crimea, while the regional authorities moved to declare independence and schedule a referendum on joining Russia that was held on Sunday.

Even as others criticized the vote as a fraud, Mr. Putin moved quickly on Monday to recognize its result, which he called “more than convincing” with nearly 97 percent of voters in favor of seceding from Ukraine. By Tuesday he signed a treaty of accession with the region’s new leaders to make Crimea and the city of Sevastopol the 84th and 85th regions of the Russian Federation.

The treaty requires legislative approval, but that is a mere formality given Mr. Putin’s unchallenged political authority and the wild popularity of his actions, which have raised his approval ratings and unleashed a nationalistic fervor that has drowned out the few voices of opposition or even caution about the potential costs to Russia.

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Putin Justifies Moves in Crimea

In his speech in Moscow, President Vladimir V. Putin defended Russia’s actions in Crimea by pointing out past Western “interventions,” including Libya and Afghanistan, at length.

Mr. Putin appeared Tuesday evening at a rally and concert on Red Square to celebrate an event charged with emotional and historical significance for many Russians. Among the music played was a sentimental Soviet song called “Sevastopol Waltz.”

“After a long, hard and exhaustive journey at sea, Crimea and Sevastopol are returning to their home harbor, to the native shores, to the home port, to Russia!” Mr. Putin told the crowd. When he finished speaking, he joined a military chorus in singing the national anthem.

He recited a list of grievances — from the Soviet Union’s transfer of Crimea to the Ukrainian republic in 1954, to NATO’s expansion to Russia’s borders, to its war in Kosovo in 1999, when he was a little-known aide to President Boris N. Yeltsin, to the conflict in Libya that toppled Col. Muammar el-Qaddafi in 2011 on what he called the false pretense of a humanitarian intervention.

Since Russia’s stealthy takeover of Crimea began, Mr. Putin has said very little in public about his ultimate goals. His only extensive remarks came ina news conference with a pool of Kremlin journalists in which he appeared uncomfortable, uncertain and angry at times. In the grandeur of the Kremlin’s walls on Tuesday, Mr. Putin sounded utterly confident and defiant.

Reaching deep into Russian and Soviet history, he cast himself as the guardian of the Russian people, even those beyond its post-Soviet borders, restoring a part of an empire that the collapse of the Soviet Union had left abandoned to the cruel fates of what he described as a procession of hapless democratic leaders in Ukraine.

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“Millions of Russians went to bed in one country and woke up abroad,” he said. “Overnight, they were minorities in the former Soviet republics, and the Russian people became one of the biggest — if not the biggest — divided nations in the world.”

He cited the 10th-century baptism of Prince Vladimir, whose conversion to Orthodox Christianity transformed the kingdom then known as Rus into the foundation of the empire that became Russia. He called Kiev “the mother of Russian cities,” making clear that he considered Ukraine, along with Belarus, to be countries where Russia’s own interests would remain at stake regardless of the fallout from Crimea’s annexation.

Photo

Russian forces arresting Ukrainian Army officers in Simferopol, Crimea, on Tuesday. The United States and European nations have strongly opposed the Russian takeover of Crimea from Ukraine.CreditAlisa Borovikova/Agence France-Presse — Getty Images

He listed the cities and battlefields of Crimea — from the 19th-century war with Britain, France and the Turks to the Nazi sieges of World War II — as places “dear to our hearts, symbolizing Russian military glory and outstanding valor.”

He said that the United States and Europe had crossed “a red line” on Ukraine by throwing support to the new government that quickly emerged after Mr. Yanukovych fled the capital following months of protests and two violent days of clashes that left scores dead.

Mr. Putin, as he has before, denounced the uprising as a coup carried out by “Russophobes and neo-Nazis” and abetted by foreigners, saying it justified Russia’s efforts to protect Crimea’s population.

“If you press a spring too hard,” he said, “it will recoil.”

He justified the annexation using the same arguments that the United States and Europe cited to justify the independence of Kosovo from Serbia and even quoted from the American submission to the United Nations International Court when it reviewed the matter in 2009.

Mr. Putin did not declare a new Cold War, but he bluntly challenged the post-Soviet order that had more or less held for nearly a quarter-century, and made it clear that Russia was prepared to defend itself from any further encroachment or interference in areas it considers part of its core security, including Russia itself.

He linked the uprisings in Ukraine and the Arab world and ominously warned that there were efforts to agitate inside Russia. He suggested that dissenters at home would be considered traitors, a theme that has reverberated through society with propagandistic documentaries on state television and moves to mute or close opposition news organizations and websites.

“Some Western politicians already threaten us not only with sanctions, but also with the potential for domestic problems,” he said. “I would like to know what they are implying — the actions of a certain fifth column, of various national traitors? Or should we expect that they will worsen the social and economic situation, and therefore provoke people’s discontent?”

Reporting was contributed by Alan Cowell from London; David M. Herszenhorn from Simferopol, Ukraine; Andrew Higgins from Brussels; Peter Baker from Washington; Andrew E. Kramer from Kiev, Ukraine; Alison Smale and Melissa Eddy from Berlin; and Mark Landler from Warsaw.

Mt. Gox Bitcoin Exchange Finds Missing Millions - TIME

Mt. Gox Bitcoin Exchange Finds Missing Millions

http://time.com/33270/bitcoin-mt-gox-wallet/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+timeblogs%2Fcurious_capitalist+%28TIME%3A+Business%29

• Maya Rhodan @m_rhodan
 

8:36 AM ET

    

The Tokyo-based Bitcoin exchange Mt. Gox, which recently filed for bankruptcy protection, says 200,000 missing coins were found in a wallet thought to be empty. The recovered loot accounts for a large portion of the 850,000 coins Mt. Gox said it couldn't locate

The Tokyo-based Bitcoin exchange Mt. Gox said Thursday that it hadstumbled upon 200,000 missing Bitcoin, worth about $116 million.

The digital currency was found in an old wallet that Mt. Gox, which has been under fire and recently filed for bankruptcy protection, had thought was empty, the company said in a letter posted on its website.Wallets act as bank accounts for Bitcoin, which has been under increasing scrutiny from authorities around the world as a volatile and unregulated form of currency. The wallet storing the lost Bitcoin used an old format, but was found to have a six-figure balance on March 7.

The uncovered loot replaces a portion of the 850,000 Bitcoin that Mt. Gox said it could not locate when it declared bankruptcy in February. The majority belonged to customers. Mt. Gox, once the world’s largest Bitcoin exchange, halted withdrawals due to a cyber attack earlier in mid-February. At the end of the month, the company had filed for bankruptcy in the United States and Japan. In March, hackersaccused the company of stealing Bitcoin that had been lost in fraudulent withdrawals.