Russia & CIS

Azerbaijan’s President Ilham Aliyev has sent a letter of condolence to the 41st President of the US, George Herbert Walker Bush.

The SWIFT system, which ensures the transfer of financial messages between all banks of the world, will not disconnect Russia despite Western sanctions. In the political conflict between Russia and the West, SWIFT takes a neutral position, SWIFT CEO Gottfried Leibbrandt said. The SWIFT system will thus stay neutral in the conflict between Russia and the West and will not disconnect the country from the system of financial payments because of the sanctions, CEO Gottfried Leibbrandt said at the SWIFT business forum in Moscow, RBC reports. "The question of disconnecting Russia from the SWIFT financial reporting system is not worth it, and our position remains unchanged: we are a neutral party that provides for the interconnection of users and whose purpose is to service the global financial industry," Mr. Leibbrandt said. SWIFT declared its neutrality back in 2014, when the question of disconnecting Russia from the system was raised for the first time following the coup in Ukraine and Russia's reunification with the Crimea. "Our mission is to be a global and neutral service provider," the company said in a statement back then. The European Parliament and the EU Council discussed such a possibility against the backdrop of sanctions in connection with the Ukrainian crisis, but the SWIFT management considered Russia's possible disconnection highly challenging to the reputation of the company and stressed that it would not make such decisions under the influence of political pressure. Nevertheless, the West still believes that disconnecting Russia from the interbank messaging system is possible. In August 2017, the Russian National Commercial Bank (RNCB) and Tempbank were disconnected from SWIFT, after the owner of the relevant software refused to cooperate with them because of US sanctions. RNCB, which works in the Crimea, said that the move would not affect its work as the bank operated only inside Russia. In January, Deputy Prime Minister Arkady Dvorkovich acknowledged that disconnection from SWIFT could create great problems for the Russian banking system. If it happens, he said, Russian banks would have to switch to an outdated technology, but Western companies would face serious problems too. In early April 2018, the United States adopted a new package of anti-Russian sanctions, which has become the most stringent one since 2014. Shortly thereafter, Washington announced its readiness to prepare new sanctions in the near future to punish Russia for supporting the Syrian authorities. It was said that Moscow was getting ready for a series of tough measures, including disconnection from SWIFT. The financial reporting system itself is based in Belgium and does not comply with US law. However, chances for Washington to succeed in cutting Russia off remain high.To counter such a threat, Russia has been developing its own analog to SWIFT that would be used inside the country. The system is called the Financial Communications System of the Bank of Russia (known for the Russian initials as SPFS). On April 13, Rosteс (State Corporation for Assistance to Development, Production and Export of Advanced Technology) announced that it was switching to SPFS. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications. The system was established in 1973. Today, SWIFT unites more than 10,000 banking and financial organisations in 210 countries and processes about 1.8 billion messages a year.Pravda.Ru

One more set of slides today, this one from a speech by Vice Admiral Igor Kostyukov, the first deputy chief of the Main Directorate of the Russian General Staff, on the topic of security in the Asia-Pacific region. MCIS has put on its website the text of his speech in Russian and video in Russian only.

The Russian administration believes that the United States will soon announce most severe sanctions against Russia. Russia will be prepared for such a turn of events, RBC reports. The Kremlin believes that the US may impose sanctions on Russia's public debt and disconnect the country from SWIFT payment system. It is also believed that Washington may impose strict sanctions on Russia's two largest banks - Sberbank and VTB. According to two federal officials, whose names were not exposed, the Russian authorities started developing countermeasures to respond to the most negative scenario long before the USA published the infamous Kremlin report in January. Previously, US Ambassador to the UN Nikki Haley said that the United States would impose new sanctions against Russia on Monday, April 16. It was assumed that Washington would take restrictive measures against the companies linked to Syrian President Bashar Assad. However, White House spokesperson Sarah Sanders said later that the decision about the new sanctions against Russia had not been made yet. The Russian authorities supposedly consider two options for possible US sanctions against Russia's sovereign debt. According to the first one of them, the USA will prohibit investing in Russia's federal loan bonds for American investors only. For a more stringent option, the ban on the purchase of the Russian national debt will be extraterritorial in nature extending to foreign (including Russian) legal entities. Currently, foreign investors hold more than a third of the Russian national debt.As protection measures, Russia considers a possibility of creating a special bank for the purchase of the Russian national debt, as well as taking certain steps that will "close" the names of those who buy the Russian national debt. Russia should be prepared for the introduction of US restrictions on investment in the Russian national debt, Deputy Prime Minister Arkady Dvorkovich said on the sidelines of the Krasnoyarsk economic forum.Russia already has a special bank to service the state defence order, whereas Russian banks classify some of their public information in an attempt to protect themselves against sanctions. Another measure - "attracting people's money" through the sale of federal loan bonds to citizens - was discussed in January, the source said.In addition, the Russian administration believes that Washington may disconnect the country from SWIFT payment system. This question has been discussed for several years already, after Russia reunited with the Crimea. Russia's disconnection from SWIFT may cause the Russian banking system to collapse. Russia may not be able to make external payments, especially for gas supplies. However, Moscow believes it can be possible to make external payments through agents, so-called bridge companies (intermediary companies).The Kremlin is also highly concerned about the possible blockage of Russia's largest banks, such as Sberbank and VTB. The two banks already operate under sectoral sanctions. However, a ban on correspondent accounts in the US or inclusion on the SDN (Specially Designated Nationals) list is a much more stringent measure that will make international operations virtually impossible.Pravda.Ru

I wrote this up quickly on Saturday for friends, and it seemed to get a positive reaction, so I decided to expand a bit and send it out to the wider world…

The United States (and the Trump administration) came out well. The would saw a measured response that showed US willingness to follow up words with actions, while also showing that Trump’s rash tweets do not equal rash actions (at least vis-a-vis Russia). Jim Mattis in particular showed that he is the chief voice of reason and restraining figure in the administration.

At the same time, the strikes accomplished little in practical terms. Syria’s ability to make and use chemical weapons was largely unaffected, because what they are using now is chlorine gas, rather than the sarin that was made in its chemical weapons program prior to 2013. Chlorine gas is much easier to make and is almost certainly made at sites other than the ones that were targeted (and even if it was being made there, it can relatively easily be made elsewhere).

For this reason, Syria (and Assad) also came out well. For the price of a few destroyed buildings they got to take over Douma and wipe out the last rebel controlled zone near Damascus. The main question is the extent to which the strikes will deter Assad from using chemical weapons in the future. My guess is that there will be some short-term deterrent effect (because of worries that the next strike will be more damaging), but little long-term effect — because of beliefs that US memories fade and because of cost-benefit calculations that show that use of chemical weapons in certain situations is highly effective in demoralizing enemies and causing them to surrender (see Douma) while also forcing somewhat reluctant allies such as Russia to publicly support Assad.

Russia is a (minor) loser for this round — Russian officials made big loud statements early on, but then clearly got scared of being painted into a corner and started backing off a few days ago. In the end, the situation showed that Russia cannot deter the United States from hitting an ally, but it can limit the extent of the strike and the choice of targets. Also, Syria’s (older) Russian-made air defenses were completely ineffective, while potentially more effective modern air defenses under Russian control were not activated. In other words, the US strikes clearly showed both the extent and the limits of Russian influence in the region. Russian leaders clearly care about this image problem, thus the somewhat ridiculous statements about Syrian air defenses successfully intercepting US missiles supposedly aimed at airfields that the US and its allies did not target.

The military balance in the region is clearly revealed. In a few days, the US and its allies were able to gather a set of forces that are much stronger than what Russia could bring to bear in the region. This is not the early 1970s, when much of the world believed that the Soviet Union could more or less match the maximum US presence in the Eastern Med (even if present-day Russian analysts are skeptical about the actual strength of Russian military forces in the region at the time). The Russian military (in terms of conventional forces) is stronger than it was a few years ago and is more than a match for any of its other adversaries, but it’s still far weaker than the US military.

Finally, the impact of the strike on US domestic politics is pretty certainly going to be short-term and very limited. Some of Trump’s isolationist allies on the far right were appalled and highly critical, but they will come back to the fold soon enough since they have no alternative to supporting Trump. What’s more, Democratic politicians’ critiques that the attack should not have been done without Congressional authorization are not likely to last long, because actually having that debate in Congress is not in their interest politically (which way to vote — to authorize Trump to use force or to allow other countries to carry out chemical weapons attacks with impunity?). Better to just carp from the sidelines on this issue and go back to the various scandals after a couple of days.

So, to sum up, the world avoided a big international crisis through a combination of US restraint, Russian desire to avoid escalation in a situation where it did not have escalation dominance, and good use of US-Russian deconfliction channels. The strike itself was not particularly effective at achieving its stated goals vis-a-vis Syria, but was good at signaling US intent and capabilities for the future (including the limits of that intent). The major problem that remains is that given what I described above, Assad is unlikely to have been deterred from future use of chemical weapons and therefore we may well be back in the same place again a few months or a year from now.

NATO welcomes Turkey's "transparency" in its ongoing counter-terrorist Operation Olive Branch in Afrin, Syria, the alliance’s chief said on Monday.

According to the training plan for 2018 approved by the Minister of Defense, the Azerbaijan Army holds competitions in various sports.

Assistant to the head of the Central Bank of Iran Seyid Ahmad Arakchi announced a ban on currency exchange outside the banking system.

The Russian newspaper Izvestiya has committed a provocation against Azerbaijan.

The Republican Party of Armenia and the Dashnaktsutyun party, which are in the ruling coalition, nominated the former president of the country Serzh Sargsyan for the post of prime minister.

The Central Bank of Azerbaijan (CBA) today held a deposit auction.

Ramiz Mehdiyev thanked the head of state for the award and recognition of his activity.

The regular violation of the ceasefire by Armenian armed forces resulted in the severe damage of the administrative and residential buildings.

News.Az reprints from The Daily Caller an article titled 'Young people advance democracy in a young country' by Raoul Lowery Contreras.

NATO's top official arrived in the capital Ankara on Monday for official talks in the wake of the U.S.-led airstrikes targeting the Assad regime in Syria.

In January-March 2018, export of oil and petro-chemical products made up 413,000 tonnes, up 6.4% from previous year, SOCAR told APA-Economics.

Russia will not delay adopting legislation in response to new U.S. sanctions, Deputy Foreign Minister Sergei Ryabkov said on Monday, RIA news agency reported.

The April 23 meeting of the PACE Bureau will hear a report of the observation mission in connection with the presidential elections held in Azerbaijan.

Participants protesting against the appointment of former Armenian President Serzh Sargsyan as prime minister blocked central streets of Yerevan.

A 3.7-magnitude earthquake hit northwestern Iran, the European Mediterranean Seismological Center said.