THE OLIGARCH SANCTIONS – STEVEN MNUCHIN EXPOSES US TREASURY FILES TO COURT CHALLENGE FOR OLIGARCHS WITH LESS TO HIDE THAN OLEG DERIPASKA

By John Helmer, Moscow

US Government economic sanctions have a hundred-year long history in US statutes and court cases, starting in 1917 when the US was at war with Germany. Trading with the Enemy Act was what the first statute was called.   It was clear then who the enemy was, and there was a shooting war in the Atlantic and in Europe to prove it.

Many US wars later, most of them for reasons which turned out to be lies, US Government sanctions have been endorsed by the American courts as a defence against an attacker whose method always included the use of force. But not now.

On Friday April 6, the US Treasury, headed by by Steven Mnuchin (lead image, centre), introduced a new type of economic sanction; read the official announcement.  For the first time, the individuals and companies targeted have no record for using force, and there is no evidence of their intention to use it. Instead, they are accused, and by the new sanctions punished, for things which American citizens have the constitutional right to exercise – the freedom of association and the freedom of expression.

The Russian targets of the new sanctions, announced Mnuchin, are proscribed for the full range of economic sanctions because of their association with the Russian government, and because they are Russians doing business in Russia. “The Russian government operates for the disproportionate benefit of oligarchs and government elites,” Mnuchin said, stamping his foot where Karl Marx, Vladimir Lenin and C. Wright Mills have famously trod before.  “The Russian government engages in a range of malign activity around the globe”. Ergo, a Russian businessman associating with the Russian government and growing rich is a threat to the equitable distribution of income and capital in Russia; ergo, he is a threat to the security of the United States. Never before has Russian capitalism been declared an enemy of American socialism, and forbidden to borrow, lend, own or trade with Americans or the US dollar. (more…)

CENTRAL BANK AUTHORIZES FIRST-EVER JAILHOUSE BANK – SULEIMAN KERIMOV, INDICTED FOR €900 MILLION IN FRAUD, MONEY-LAUNDERING, AND TAX EVASION, APPROVED TO TAKE OVER VOZROZHDENIE BANK FROM RUNAWAY ANANIEV BROTHERS

By John Helmer, Moscow

The Central Bank of Russia has authorized Suleiman Kerimov to take shareholding control of Vozrozhdenie Bank from Dmitry and Alexei Ananiev. The negotiation between Kerimov and the Central Bank occurred late last week. The Ananievs were absent abroad.

Eight weeks earlier, on December 15, the Central Bank had ousted them from shareholding control of Promsvyazbank, the first of the Ananiev banks; announced several billion dollars in bailout financing,  and began an  investigation of the Ananievs for grand larceny and fraud.  The Central Bank and the Finance Ministry have subsequently decided to nationalize Promsvyazbank.

The new deal with Kerimov privatizes Vozrozhdenie Bank on terms which provide state bank funding and guarantees, details of which have not been officially announced.

The circumstances of the double bailout are unprecedented in Russian banking history. Never before have two suspected bank thieves on the run been replaced by a man under arrest and facing trial for money laundering, fraud, tax evasion and other crimes.

There is one difference between the Ananiev brothers and Kerimov. For the time being, the Ananievs have yet to face criminal or civil charges in a Russian court; they have taken the Central Bank to court in Moscow charging abuse of power. Kerimov, by contrast, is facing indictment by French prosecutors in Nice for financial transactions identified in the Nice magistrate’s records  at almost one billion Euros. He is under house arrest at Cap d’Antibes, with a court-ordered bail of €40 million to relieve him of imprisonment after he had served two days. 

There is one more difference. According to the United Nations Convention Against Corruption (UNCAC) which Russia ratified in 2006,  Kerimov as a senator in the Federation Council is a politically exposed person (PEP) who cannot be authorized to take control of a bank while he exercises political functions unless he meets exceptionally strict domestic and international standards of disclosure and supervision.  Kerimov cannot qualify.  In addition, Russian law on the status of elected officials prohibits Kerimov from conducting business transactions with the Central Bank or anyone else for personal gain.

The Central Bank was asked this week to confirm whether it had negotiated in Moscow with Kerimov and authorized him to take control of Vozrozhdenie from the Ananievs.  The bank refused to say by telephone, and did not provide an official release. It requested an email of the question, and then  refused to answer.

Senator Yury Vorobyov (Vorobiev), deputy speaker and head of the Federation Council’s control commission for enforcement of the senators’ code of conduct, was asked if Kerimov’s negotiations with the Ananievs in January and with the Central Bank a few days ago violate the law prohibiting members of the Council from carrying on business. Vorobyov refused to respond either directly, or through a spokesman.

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FIRST OLIGARCH SANCTIONS TEST — DMITRY PUMPYANSKY TAKES NEW YORK PLUNGE, HOLDING HANDS WITH ANATOLY CHUBAIS

By John Helmer, Moscow

Dmitry Pumpyansky (lead image, left), the 53-year old oligarch who dominates the Russian steel pipes business, knows how to pay for protection.

Last week the US Treasury listed him as an oligarch whose corruption record and closeness to the Kremlin may qualify him for sanctions, according to Section 241 of the Countering America’s Adversaries Through Sanctions Act (CAATSA). Pumpyansky is vulnerable to US asset freeze and credit cut-off because he owns steelmills, pipemills, bank accounts, and other assets in the US; about one-quarter of his sales revenues, profits and earnings are produced in the US. So why is he proposing to sell shares in his American business on the New York Stock Exchange in a few weeks’ time?

There are three answers. One is that Pumpyansky’s American business is the only loss-maker in his group, so he is selling the Americans a pup.  The second is that the American banks underwriting the initial public offering (IPO) of what is titled IPSCO Tubulars Inc. are also large lenders to the business;  so they are recovering their money, and reducing the risk that sanctions against Pumpyansky would hurt them in future. Finally, Pumpyansky is paying Anatoly Chubais (lead image, right) to influence US Government officials not to penalize Pumpyansky. Chubais, a board director of Pumpyansky’s parent company in Moscow, has been the American candidate for ruling Russia since he ran the state privatization programme from 1992; President Boris Yeltsin’s Kremlin; and then the breakup and selloff of the Russian electricity system. Chubais is the only powerful Russian state company official not to be named on last week’s US Treasury list. (more…)

US GOVERNMENT RIDDLE: WHY ARE SO MANY DOGS NOT BARKING? BECAUSE THE CAATSA GOT THEIR TONGUES

By John Helmer, Moscow

As midnight tolled in Washington, DC, and January 29 slid into January 30, the deadline for the US Government to produce a report to the Congress listing Russian oligarchs close to President Vladimir Putin slipped by in the darkness. No dog barked.*

Required by the Countering America’s Adversaries Through Sanctions Act (CAATSA), enacted with President Donald Trump’s signature last August, the oligarch report was not produced on time. Nor were three other reports – one on sanctions for Russian sovereign debt issues, one on sanctions for business with the Russian defense sector, and one on the extent to which Russian state banks and state asset holdings have re-nationalized key sectors of the Russian economy, such as banking, insurance, real estate, and ports.     

There was no press release from the White House, the US Treasury, or the State Department. The  House Foreign Affairs Committee and the Senate Foreign Relations Committee, which are responsible for administering CAATSA, made no announcement of  what had happened, and  not happened. Despite a media blitz in advance of the deadline, anticipating the release of dozens of Russian oligarch names as potential targets for fresh US sanctions, not a single mainstream US newspaper or broadcaster reported the failure of the list to materialize.

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OLEG DERIPASKA’S DUAL ALIBI — NAÏVE DUPE OF PAUL MANAFORT, FAITHFUL SERVANT OF VLADIMIR PUTIN (AND VICTOR YANUKOVICH)

By John Helmer, Moscow

On January 10, Oleg Deripaska (lead image, front left), the Russian oligarch who controls the state aluminium monopoly Rusal and electricity producer EN+, ordered his personal lawyers, Bryan Cave, into the New York State Supreme Court in Manhattan. There, court papers reveal that Deripaska is charging Paul Manafort (rear left) and his associates with “fraud, gross negligence, blatant disloyalty, and rapacious self-dealing”. Deripaska’s allegation is that between April and July of 2008 he was swindled out of $26.3 million.

The court papers represent Deripaska to be a naïve partner in a business in Odessa, Ukraine, for which Deripaska did no due diligence; took no security over assets; kept no records; saw no accounts; and did nothing at all for almost a decade.  In the New York court papers, Deripaska confesses himself to be unable to manage the smallest of businesses, let alone several multi-billion dollar enterprises vital to the economic security of the Russian state.

“Of course, Oleg Vladimirovich doesn’t think that,” responds a Russian business figure who knows Deripaska well. “This is Deripaska’s alibi in case his name is listed as one of the oligarchs liable for the next round of US sanctions. He is saying he hasn’t been buying favour from Americans close to [President Donald] Trump; he says they have cheated him. And if Deripaska’s name turns out not to be on the new US list, it’s also his alibi when the Kremlin asks why.”

“The Russian oligarchs are between the hammer and the anvil,” explains an international banker who has served on a leading Russian corporation board. “It’s bad enough if the coming US sanctions list puts their US business and assets at risk. It’s even worse if they aren’t on the list, and [President Vladimir] Putin suspects them of disloyalty and of cutting a secret deal with the Americans.” (more…)

GOD BLESS US, ALMOST EVERY ONE! – NO KREMLIN CHRISTMAS DINNER FOR THE OLIGARCHS

By John Helmer, Moscow

This isn’t news:  President Vladimir Putin (lead image, right) is running for re-election on March 18.

According to the latest national polls, he is likely to win with a larger majority of a smaller turnout than in 2012. As Tiny Tim (left) almost said in Charles Dickens’ Christmas Carol, God bless us, almost every one!

What is news is that after declaring his re-election bid to a group of autoworkers; proclaiming a hike in pensions from New Year’s Day; and announcing to Russian troops in Syria that most of them will return home,  Putin is not – repeat not — hosting his annual Christmas dinner for the oligarchs.  God bless us, almost every one! (more…)

SULEIMAN KERIMOV HAS FRENCH LEGIONNAIRES’ DISEASE — RUSSIAN STATE BANKER, OLIGARCH AND OTHER WORTHIES BEG FRENCH PRESIDENT FOR RELEASE TO RUSSIA

 

By John Helmer, Moscow

Russia’s leading state banker German Gref (lead image, left) and members of the Russian intelligentsia have written to the President of France, Emmanuel Macron, announcing their judgement that Suleiman Kerimov (centre) is innocent of the indictment the French prosecutor has filed in Nice. This charges Kerimov with laundering  more than half a billion US dollars, allegedly transported in suitcases of cash through Nice airport; and evasion of millions of Euros in French property sale taxes through fraudulent transactions extending from the south of France to Switzerland.  

The Russian group also reveals that Kerimov suffers from severe cardiological problems for which the letter proposes he would be better cared for medically in Russia, rather than in France.

Heading the eleven signatories of the letter to Macron is Mikhail Prokhorov (right) and his sister, Irina. She is a member of the Ordre des Arts et des Lettres, a French honorific well below the Légion; she then obtained a promotion to the Legion in 2012. The first honour conferred by the French on her brother is that until Kerimov,  he was  the only Russian oligarch to have been jailed in France on a criminal charge.

According to Prokhorov, Gref and the others, Kerimov is “a supreme statesman of the Russian Federation”, and accordingly, he should be released from detention in France to “continue his  work in the Federation Council of the Russian Federation.”  This is the first time a Russian has publicly identified any work Kerimov has done in the upper house of parliament since his election in 2008. (more…)

HIGH-STAKES GAME OF HIDE AND SEEK AT SULEIMAN KERIMOV’S VILLAS IN CAP D’ANTIBES

By John Helmer, Moscow

 The arrest and indictment of Suleiman Kerimov in Nice last week on charges of tax fraud and money laundering have begun loosening the tongues of international bankers and commodity trade financiers who have done business with Kerimov in the past, and who have been  guests at his Cap d’Antibes villa parties.

They say Kerimov’s wealth is illusory and exaggerated by the press, because his assets are heavily leveraged by bank loans which can be called in by material changes in borrower condition; Kerimov’s arrest may be one of them.

The sources also believe the money for Kerimov’s villa purchases in Cap d’Antibes, which are the target of the French prosecution, originated from Russian state banks.  “The international banks largely dropped Kerimov’s business after 2008 when the share value securing his borrowings collapsed, and he had to sell up,” comments a source who was involved in financing for Kerimov before the crash. “Since then he’s been a dependent of Sberbank.  The Sberbank officials knew he was high risk, and they treated him like a slave. Kerimov had to kiss their feet.”

Investigations in Nice, Moscow and Switzerland, where Kerimov’s asset holdings are managed, confirm that Kerimov’s chief creditors today are the state banks, Sberbank and VTB, run by German Gref and Andrei Kostin. A smaller line of credit has been extended by a third state lender, Gazprombank. The international bankers say they don’t know whether Russian state bankers are also beneficiaries of the villas at Cap d’Antibes.

In Moscow there is nervousness over what Kerimov’s telephone conversations, tapped by  French prosecutors, have revealed already; and what he will admit under interrogation about who may be the owners of the real estate, if not himself.   An international bank source believes the real villa owners aren’t Russian bankers. “They don’t like people like Kerimov,” the source says. “Certainly not [Sberbank chief executive German] Gref and [VTB chief executive Andrei] Kostin. They are independently rich; they don’t need guys like Kerimov. They would not put themselves into Kerimov’s hands. These houses are never worth what the papers are reporting but they are all Kerimov’s stuff.  That’s been his business style. He buys assets in bagloads – bank shares, commodities, real estate. But now the market has turned like it did for his other assets. You can’t sell a house on the Cote d’Azur at the price Kerimov paid. His business is show business. That’s caught up with him now.” (more…)

THE GOLDEN IDOL — FRENCH PROSECUTORS DO TO SULEIMAN KERIMOV WHAT RUSSIANS DON’T DARE, UNTIL NOW

By John Helmer, Moscow

Evasion of French taxes is the criminal case against Suleiman Kerimov (lead image, rear left), who was jailed in Nice on November 20; indicted two days later; then released on €5 million in bail, his passport confiscated and his freedom curtailed by French police surveillance which may last for years, before the French judicial process is complete.

If convicted on the charges, Kerimov faces a penalty of ten years in prison. If he pleads guilty, pays the back taxes, a money fine or asset forfeit, he may be released to return to Russia. There, the French evidence and Kerimov’s plea will prove he is liable to criminal violations of the Russian law on disclosing offshore assets, and of failing to pay Russian taxes on the money used to acquire them. A Russian prosecution of Kerimov would then become the basis for a criminal prosecution for money laundering in Switzerland against the entities through which Kerimov has operated, and the Studhalter family which has served as his agents for more than a decade.

For the Kremlin, the Kerimov affair represents as great a criminal case as the trial, thirteen years ago, of the oligarch Mikhail Khodorkovsky – except that this time the courts, prosecutors, and jailors in Kerimov’s case are all impeccably French. Not a single Russian lawyer, journalist, publication, radio or television broadcast has noticed. The silence is deafening. (more…)

SANCTION FOR SERGEI FRANK – UK APPEALS COURT APPROVES $75 MILLION PENALTY FOR FAILURE OF 12-YEAR VENDETTA LAWSUIT

By John Helmer, Moscow

Sergei Frank, a former federal transport minister and chief executive of the state shipping company Sovcomflot since 2004, is unique among Russian state officials. He is the only one to have been adjudicated by a series of UK judges to have lied, been dishonest in evidence-gathering, and vindictive in his use of the courts against business rivals. 

This week in London, in a unanimous ruling by three judges of the Court of Appeal, Frank has been judged to have foolishly postponed the day of reckoning by unjustified criticism of his judges, and ordered to pay $75 million to a UK-based Russian shipowner. This puts an end to the 12-year vendetta which Frank has waged over allegations which this week’s ruling says were properly “dismissed because the transactions were not dishonest or in breach of trust”.

Frank is also unique among Russian state officials. Despite all the judgements against him, and the millions of dollars of penalties for his misjudgements which Sovcomflot has had to pay, he hasn’t been sacked. Not yet. (more…)

RED ALERT FOR OLIGARCHS – DID PRESIDENT PUTIN AGREE WITH PRESIDENT MACRON TO THE ARREST OF SULEIMAN KERIMOV FOR MONEY LAUNDERING

By John Helmer, Moscow

President Vladimir Putin’s campaign to repatriate Russian capital from offshore havens, and to force the well-known Russian oligarchs to return their cash and assets to Russia, took a leap forward on Monday evening in Nice, France. That is when French police arrested Suleiman Kerimov (lead image), and refused to accept that the diplomatic passport he was eligible to carry, issued by the Russian Foreign Ministry in Kerimov’s capacity as a senator of the Federation Council for Dagestan, provided him with the immunity Kerimov protested that it did.

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VTB CORROBORATES EN+ LISTING ROLE AND MULTI-MILLION DOLLAR LOSSES

By John Helmer, Moscow

The Russian state bank VTB has corroborated its role in managing a complicated set of loans, insider transfers and repurchase agreements for Oleg Deripaska’s aluminium and electricity holding, EN+, which issued global depositary receipts on the London Stock Exchange last week. Since the listing, the Russian group has lost $140 million in market capitalization. An international banker in London commented that the listing “breaks new ground, not to say exchange rules, for a share that isn’t a share and for a free float that isn’t either.” (more…)

OLEG DERIPASKA’S NEWEST DISAPPEARING TRICK – EN+ SHARE PRICE DIVES AFTER PROSPECTUS DRAWS NO COMMERCIAL DEMAND; VTB REQUIRED TO FINANCE CHINESE SHARE BUYER

By John Helmer, Moscow

Last week, the first week in the life of Russia’s EN+ Group on the London Stock Exchange, Oleg Deripaska (lead images), control shareholder and chief executive, took $500 million in cash for himself, then triggered a $112 million loss for the other shareholders led by the Russian state bank, VTB.  

This followed an investigation by the UK’s Financial Conduct Authority (FCA) of EN+’s application to list and trade global depositary receipts (GDRs) instead of ordinary shares,  which Deripaska will not be listing at all.  Approval for the listing on the London exchange was given on condition that Deripaska published a series of investment warnings and liability disclaimers at the head of the EN+ prospectus, which was issued on November 3. In capital letters, investors were warned: INVESTMENT IN THE GDRS [of EN+] INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE PROSPECTUS, PARTICULARLY, THE SECTION HEADED ‘‘RISK FACTORS’’, WHEN CONSIDERING AN INVESTMENT IN THE COMPANY.”

London sources say the market took this warning so seriously, there is almost no investor  demand for the shares. Sold to a group of insiders at $14 before trading commenced last week, the issue of 112.1 million shares fell towards $12.80 before price support was observed. At a current price of $13 per GDR (equals one ordinary share) $112.1 million in market capitalization has already been lost. (more…)

OPEN AND SHUT CASE – THE RUSSIAN DIAMOND MINE THAT HAS BEEN STOLEN AT LEAST FOUR TIMES IN TWENTY YEARS

By John Helmer, Moscow

Stealing diamonds is a common crime. Stealing diamond mines is not unheard of, particularly  in Africa. But the Grib diamond mine in the Arkhangelsk region of Russia is the only diamond mine to have been stolen four times in just twenty years. This is a record in the history of the diamond world, and one which four well-known Russian men and one lady can be proud of, quietly.

Alisher Usmanov (lead image, in frame), Vagit Alekperov (under fedora hat), and Vadim Belyaev (kepi) were the culprits until August of this year,  when Elvira Nabiullina, Governor of the Central Bank of Russia,  and Andrei Kostin, chief executive of the VTB state bank , joined in the getaway. The value of the loot is now $1.45 billion. (more…)

ROMAN ABRAMOVICH DOESN’T DRINK NOVOKUZNETSK RIVER WATER, PREFERS THE MEDITERRANEAN FOR HIS AQUATHERAPY

By John Helmer, Moscow

Roman Abramovich (lead image) is the leading shareholder of the Russian steel, iron-ore and coal mining group called Evraz. Among Russia’s leading steel groups, it ranks second in output of crude steel; fourth in market value. It is the leader in indebtedness.

By international measures, Evraz also leads its Russian peers in its record of controlling noxious air and water emissions from mill and mine operations. CDP, an international agency for monitoring industrial pollution, reported a year ago its global answer to the question, “who’s ready to get tough on emissions?” Evraz came 12th in CDP’s table of the world steel emission control leaders; no other Russian steelmaker was ranked.  That was  not exactly a commendation in international terms. According to CDP, “Evraz ranks third last. It performs among the bottom companies on our emissions and energy benchmarking, and does not disclose forward-looking reduction targets, or any participation in research toward breakthrough emissions reduction technologies.

If you live in Novokuznetsk city, where Evraz operates two steel plants, the company’s international status is too good to be true. For the past decade, Evraz has been under local court and federal orders to put a stop to its waste water pollution by building a new water treatment plant. The company refuses.  It won’t explain, hoping that its influence with city, regional and federal government officials, will ensure that there will no enforcement, and no news of this either. (more…)

ANCHORS AWAY FOR RUSAL, OLEG DERIPASKA IN SHARK FIN SOUP

By John Helmer, Moscow

When you are a Russian oligarch with a 20-year record of settling out of court with friends, partners and investors accusing you of deceit; when you have a 7-year record of failing to sustain your share value in a genuine stock market, what do you do next? You announce to a neophyte Financial Times reporter that you are selling your shares on the London Stock Exchange with the price underwritten by an anchor investor from China. The newspaper provides free advertising. Noone asks the Chinese anchormen why they are spending money on a business combining Russian electricity and Russian aluminium whose separate parts other Chinese investors have nixed many times before.

Answer: the deal is guaranteed by the Chinese and Russian states, with an assured premium in a secret buy-back option.  The Russian state aluminium monopoly Rusal, is now the Chinese-Russian state aluminium monopoly, plus the Siberian electricity utilities, Eurosibenergo and Irkutskenergo.   So long Oleg Deripaska (lead image)! Howdy-doo Vladimir Putin and Xi Jinping!  

Hold on, says an insider familiar with the Rusal board deliberations:  “the London IPO which Oleg Vladimirovich is now promoting looks like a test of foreign investor resistance to sanctions, combined with a bet on the rising price of aluminium. Who in his sober mind would now invest into a fully state-controlled company such as Rusal or En+?  Only investors fully backed up or financed by the state. But is Deripaska sharing Kremlin control with Beijng control?  Unlikely — so this is a fake privatization, just like the Rosneft share sale.” (more…)

OLEG DERIPASKA AND PAUL MANAFORT — THE HUSTLER GOT HUSTLED

By John Helmer, Moscow

Oleg Deripaska (lead image, left) is famous for snatching other people’s money and legging it.

The records of the High Court in London show what he did to Mikhail Chernoy (Cherney), Boris Berezovsky, and Roman Abramovich. Chernoy recovered $200 million in 2012;  click to open

Only two people have ever taken Deripaska’s money and legged it themselves. One was Anthony Louis, owner and editor of the Moscow Tribune,  the first English-language newspaper published in Moscow. Louis took several thousand dollars in exchange for shares to keep his paper afloat but never handed over the shares to Deripaska. The newspaper sank without trace in 2002.

In April 2008 Paul Manafort (lead image, right) took $18,938,400 from Deripaska in return for which he promised to invest up to $100 million in Ukrainian cable television and telecommunications companies. Manafort trousered the cash, or so Deripaska has alleged in court, as he  has been trying to get his money back. 

But Manafort’s hustle has been reported in US newspapers as an attempt to promote Kremlin influence in US elections, especially the one which put Donald Trump into the White House last November.  The evidence for the subversion claim is now being gathered by the Special Counsel Robert Mueller, and reported publicly by leaks of what his investigation has placed in evidence before a grand jury. These include CIA, NSA and FBI surveillance and wire taps of Manafort during the presidential election campaign – yes, during the presidential campaign — and afterwards. (more…)

THE CENTRAL BANK’S DOMINOES — OTKRITIE BANK’S COLLAPSE FOLLOWED TRUST BANK ASSET RAID

By John Helmer, Moscow

The collapse of Otkritie Bank last month is the largest Russian bank failure since the collapse of National Bank Trust in December 2014.  The Central Bank rescue of Trust made inevitable the much more costly bailout of Otrkitie, announced a fortnight ago on August 29,   charges Ilya Yurov, the former control shareholder and chief executive of Trust, speaking from exile in the UK.  

The reason, according to Yurov, is “the dishonest and deliberately malicious actions of the management and shareholders of Otkritie Bank, and also, unfortunately, a number of officials of the Central Bank of Russia and the Deposit Insurance Agency.”   The state organizations, Yurov alleges,  “continue to adopt dishonest practices when initiating their processes of ‘financial rehabilitation’ or the prevention of bankruptcy of the Russian banks, which inevitably lead to the violation of the rights of customers and bank lenders,  and significantly worsen the situation of the financial industry as a whole.”

Bank analysts and investors in the Russian banks say the combination of failures reveals grave weaknesses in the Central Bank’s supervision. “The black holes in the Russian banking system are expanding,” believes a London banking source. “The more money the Central Bank lends to stop bankruptcy, the faster the cash disappears. Sooner or later, the falling dominoes will come down on [Central Bank Governor Elvira] Nabiullina [lead image] herself.”

Between December 2014 and May 2015 the Central Bank loaned Rb127 billion ($1.7 billion) to Otkritie for the takeover of Trust in what Russian bankers call a “sanitation” – a state funded bailout, administered by the Deposit Insurance Agency (DIA)  which stops short of bankruptcy, court-ordered administration, or liquidation.

Then late last month,  after Otkritie depositors lost confidence in the bank and withdrew Rb693 billion ($11.6 billion)  from Otkritie accounts in June,  July, and August,   the Central Bank topped the senior management and board, froze transactions, and commenced fresh lending to preserve Otkritie’s solvency. In exchange for the new cash, the Central Bank now owns 75% of the bank’s shares. Over the coming weeks, from Rb250 billion ($4.3 billion) to Rb400 billion ($6.9 billion) will be the Central Bank bailout required, a deputy governor at the bank announced on September 1. 

Yurov has been charged in Russia with defrauding Trust, triggering the bank’s failure after related-party lending to a network of offshore companies, which Yurov controlled, drained the bank of its cash. Up to $1 billion has been reported as unaccounted for, if not exactly lost. Early this year two of Yurov’s subordinates at the bank were tried and convicted of embezzlement from the bank, using fake loan papers.  

In London and New York Yurov is counter-charging the now ousted chief executive and control shareholder of Otkritie, Vadim Belyaev,  and the next most powerful shareholder on the Otkritie board, Ruben Aganbegyan,  with conspiracy to attack Trust, push it into sanitation,  and withdraw Trust’s cash for themselves through Otkritie. Yurov is also accusing three Central Bank officials at the time of being participants in the cash-and-grab conspiracy.

“Yurov is not a credible accuser,” a Central Bank veteran commented in Moscow. “As the old Russian saying has it, Вор у вора дубинку украл – a thief is stealing a bludgeon from another thief.” (more…)

WHAT HAS IGOR ZYUZIN, COAL AND STEEL OLIGARCH & NEW YORK TIMES HERO, DONE TO DESERVE PROSECUTION FOR BEING THE DIRTIEST OLD MAN IN THE URALS

By John Helmer, Moscow

Igor Zyuzin (lead image) is the first Russian oligarch to face prosecution for polluting the air around his factories. The announcement of criminal charges last week comes as Chelyabinsk regional and city officials escalate a war against lobbying by well-known names around President Vladimir Putin to save Mechel, Zyuzin’s coal and steel group,  from the multibillion rouble cost of installing the clean-air controls required by Russian law.  

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THE IMPROPER ASSOCIATION (MAYBE CRIME) OF VICTOR PINCHUK WITH HILLARY, BILL AND CHELSEA CLINTON, COVERED UP BY THE US MEDIA, US DEPARTMENT OF JUSTICE, AND THE INTERNATIONAL MONETARY FUND

By John Helmer, Moscow

Never in the field of American conflict with Russia has so much wool pulled over the eyes been owed to so few sheep.  That was during the losing presidential campaign of Hillary Clinton. Now, in the investigations of President Donald Trump and his family, it’s a case of so many sheep producing so little wool. (more…)

THE CRIMINAL CASE OF SERGEI MASLOV – PROTÉGÉ OF GENNADY TIMCHENKO, BAD DEBTOR, OR FALL GUY?

By John Helmer, Moscow

When it happened eight months ago, the arrest of little known public works contractor Sergei Vladimirovich Maslov (lead image, right) made a sensational bang. The outcome, eight months later, is a silent ringing one; that’s ringing as in Russian telephone justice.  

At his palatial home at Arkhangelskoye, outside Moscow, on October 19, Maslov refused to let the police in, so they used sledge hammers on his front door before they took him away. A commercial television company chartered a helicopter to fly slowly over the mansion to film its tennis court, guest house, banya, servants’ quarters, garages and gardens. The cameras were invited in to film Maslov’s rooms and make an inventory of his closets, shoes, safes, as well as the objets d’art on the walls. His garage was opened to reveal several luxury autos. Pictures of Maslov’s motor yacht, berthed somewhere in Italy, surfaced in print

The message was that Maslov was very rich.  But the charge against him was that he was only slightly  crooked. He has been charged with defrauding a bank which had gone bust two years earlier of Rb1 billion ($16 million). Also arrested and charged was an accomplice, Vladimir Karamanov. He let the police into his home when they knocked; his face and possessions haven’t been displayed on television. The two men were flown by police to Rostov-on-Don; held on remand for a month; and then released in November to go home, purportedly under house arrest.

This week the Leninsky District Court of Rostov-on-Don  refuses to say if there is a continuing arrest order for either Maslov or his property; if a new hearing has been scheduled;  or if the prosecutors have dropped the case.  Lawyers for Maslov refuse to say what the status of the charges against Maslov are, or if there remains any case for him to answer. These are signals that whoever ordered the police into action last October has decided enough is enough.

Sources who know the players and their businesses agree Maslov was targeted by someone much richer and more powerful, who also sponsored the press coverage. The sources say Maslov’s recent business has been tied to Gennady Timchenko (lead image, left); so the sources are divided in their suspicion between Timchenko and his rival in the gas business, Igor Sechin, chief executive of Rosneft. According to one source, “either it was a pressure from Timchenko & Co. to extract money from Maslov, who pretended to be a Timchenko man and grabbed more than he was entitled to. Or it’s one of the battle fronts of the silent war between Sechin and Timchenko over new gas production and Novatek. To me, it looks like the first scenario. Timchenko initiated the arrest. Under pressure Maslov agreed to return money. Charges have been softened or dropped.”

This morning in Moscow Timchenko categorically denies both. (more…)

CRUISING ON THE SHIP OF STATE – DOES RUSSIAN TOURISM ABROAD SINK OR SWIM?

By John Helmer, Moscow

It used to be fashionable for European tourists of high class, especially the ladies with their menfolk, to visit wars and enjoy the display of artillery at night; the clash of infantry and cavalry on the battlefield; and the morgues where the casualties were displayed in naked and dismembered heaps afterwards. Frisson tourism then, extreme or shock tourism today.

The Crimean War, for example, was further away from London and Paris than St. Petersburg, but was visited by more British and French than Russian tourists; that was because the Anglo-French side was winning. These days American tourists do not cruise the waterways of the Persian Gulf; trek in the Afghan mountains; holiday in houseboats on the Tigris; or visit the ancient ruins of Leptis Magna (Libya)  and Palmyra (Syria).  The reason isn’t want of aesthetic taste for the sights or of appetite for frisson.   It’s because the US is losing the wars in those places. Tourists, like soldiers, want value for money and they aim to return home. (more…)

OLEG DERIPASKA TRIES BEATING LONDON MARKET REGULATOR WITH RUSAL, EN+ COMBO SHARE – HENRY FOY, FINANCIAL TIMES ENGAGED TO KICK UP THE PRICE

By John Helmer, Moscow

Oleg Deripaska (lead image, right), the controlling executive of Rusal, Russia’s state aluminium monopoly,  has run into difficulty winning the approval of the British Government’s stock exchange regulator, the UK Listing Authority (UKLA),  for an initial public offering (IPO) of shares in EN+. This is the holding unit through which Deripaska runs Rusal; the Siberian hydroelectricity generating company Eurosibenergo;  and coal and molybdenum mines.  Asked to respond to the informal approach which has been made so far on Deripaska’s behalf, UKLA spokesman Chris Hamilton refused to confirm or deny the approach, adding: “any interaction we may have with a firm wanting to list is confidential so [it] isn’t something we can comment on even off the record.”

Rusal insiders say no international bank has accepted Deripaska’s mandate to manage and underwrite a London Stock Exchange (LSE) listing for EN+.  That leaves only Kremlin backing for the share sale through the state banks, said the insider.  “My understanding is that VTB and Sberbank play an active role in it.”  

An earlier attempt, promoted by Deripaska in Bloomberg at the start of February, for Rusal to sell its shares on the LSE, was a feint, a Rusal source said. It was aimed at deterring Mikhail Prokhorov’s Onexim group, a minority shareholder which has been trying to sell its 17% stake in Rusal for years, from making a deal at a discount to the market price for the share. “It has never been seriously considered,” the Rusal insider said. “It was EN+’s and Rusal’s attempt to thwart Onexim’s sale of its Rusal shares to the market, which Deripaska considered harmful to Rusal. This is an example of fake news.”

Part of the problem, London market sources add, is that the EN+ share sale is viewed outside Russia as a bid by the Kremlin to demonstrate investor confidence in the future of  the Russian economy, despite sanctions.  “But if you can’t disguise that nobody is buying except for the Russian state banks, then the scheme is self-defeating, just  as the Rosneft share sale was last year.”  For details of that story, read

Another problem, market sources in London say, is that Deripaska himself has already demonstrated considerable risks for investors in the Hong Kong listing of Rusal, now priced at a third of its IPO value. Deripaska risk, they add, also led to the US Government rejecting a deal for the sale of the Opel division of General Motors to a Deripaska-led combination with Sberbank and German government funding; Deripaska was turned down in 2009. For details, read this. Last month, the Opel sale was agreed to the French Peugeot PSA group.

On May 15 Deripaska launched a lawsuit in federal US court in Washington, DC, in a bid to defend his reputation in that country. “Mr. Deripaska has never stolen assets from Ukraine or elsewhere”, lawyers for Deripaska say in the 12-page complaint against Associated Press (AP) of New York, which can be read here. It is defamatory, the lawyers add, to make Deripaska “appear to have been engaged in criminal conduct” and “making him appear infamous or odious.” (more…)

MIKAIL SHISHKHANOV PLAYS RUSSIAN BASEBALL – FOUR STRIKES, YOU CATCH, YOU SCORE

By John Helmer, Moscow

Mikail Shishkhanov (lead image, left and right) is the chief executive and control shareholder of B&N Bank (Бинбанк, BiNbank), one of the fastest growing banks in Russia today. What is driving that growth, however, is a combination of state money and influence in circumstances open to challenge from government regulators for the bank’s lack of transparency. 

Four recent transactions by the bank and related-party companies involving Shishkhanov have drawn a  warning from Central Bank first deputy governor, Sergei Shvetsov,  that cash from the Central Bank and from privately subscribed pension funds is what is driving B&N Bank’s growth, and not too prudently or lawfully.  “Shareholders are trying,” said Shvetsov, “to use the resources of pension funds not only for public investment in public instruments, but also to finance projects, fully or partially affiliated with the shareholders themselves”. To secure against conflict of interest and insider dealing, Shvetsov proposed to exercise “strict supervision.”

Shvetsov is head of financial market regulation at the Central Bank of Russia (CBR). His role, according to the bank,   includes “countering malpractice in the financial market, including regulation and control over the observance of the requirements of Russian Federation legislation on countering the illegal use of insider information and market manipulation.”

This week the CBR was asked to clarify whether it is investigating related-party dealings in the sale of $150 million worth of  B&N Bank bonds to the  Safmar pension fund group, both  controlled by Shishkhanov;  the sale to Safmar of Rb3.2 billion ($44 million) in shares of Evroplan, a leasing company also controlled by Shishkhanov;  the sale to Shishkhanov companies of Rb32.4 billion ($500 million)  in shares of Russneft,  the oil company controlled by Shishkhanov’s uncle, Mikhail Gutseriev; and finally, B&N Bank’s role in underwriting the sale of $60 million in fraudulent Tatfondbank bonds, weeks before the Central Bank imposed bankruptcy administration on Tatfondbank. The CBR would neither confirm nor deny, explaining “we don’t comment on actions connected with active banks.”

When the Federal Service for Financial Markets (FSFM), the formerly independent financial regulator  now part of the CBR organization and directed by Shvetsov, was asked the same question, it replied: “We don’t comment on active banks and companies.”  

A Russian oil industry banker says “it’s clear from Russneft’s share trading record since last November’s IPO that there is almost no sale volume. Also, the share price isn’t responding to the price of oil or to the movement of the other Russian oil companies. That means Russneft is closely held. There’s a fake float, not a free float.” (more…)

MIKHAIL FRIDMAN AND GREGORY SHENKMAN – THE ODD COUPLE AT WORK, AGAIN

By John Helmer, Moscow

Mikhail Fridman (lead image, left) has enough problems not to want to make his position worse in the US, Europe and Russia – all at the same time.

There have been recent protests outside Fridman’s Alfa Bank branches in Moscow, St. Petersburg and Nizhny Novgorod, as well as inside the State Duma in Moscow, accusing Fridman of helping to finance the troops of the Kiev regime in combat on the Novorussian front.

Fridman’s Russian telecommunications company Vimpelcom – headquartered in Amsterdam, listed on the Nasdaq Stock Market in New York – has been under close supervision by US Government inspectors as part of an anti-corruption settlement of its activities in Uzbekistan a year ago. Then last week in Madrid, Fridman and Vimpelcom were reported to be under joint US-Spanish investigation for a fraudulent takeover attempt at the Spanish telecommunications and games provider, ZED+; and allegedly for paying bribes through ZED+ companies in Russia to associates of the current Russian Interior Minister, Vladimir Kolokoltsev.

The former chief executive of Vimpelcom Russia, Mikhail Slobodin, is in hiding, on the run from a  corruption indictment filed in the Russian courts last September. 

Fridman’s LetterOne holding has announced from London it will not be investing in Russia in future, and prefers the US instead. “It’s too risky,” Fridman told Bloomberg  last year. 

So why have the risk-averse Fridman and the fugitive Slobodin engaged the San Francisco-based, Russian-speaking Ukrainian Gregory Shenkman (lead image, right) when Shenkman is currently facing multiple court claims in Pennsylvania,  Delaware,  and California for millions of dollars in unpaid debts, alleged embezzlement, and sexual harassment?  Sources in California and also in Italy,  where Shenkman has been seen in recent days, claim Fridman needs the American “to hustle for the next generation of data applications technology — apps — to install on telephone devices and revive growth of revenues and profits. Shenkman is part of Fridman’s business shift out of Russia. But like ZED+, Shenkman is a big risk in the US.” (more…)

ALEXEI MORDASHOV PREPARES $400 MILLION DOLLAR TAKEOVER OF CANADIAN GOLDMINER – HIT AND RUN FOR KREMLIN FOREIGN INVESTMENT BAN

By John Helmer, Moscow

Alexei Mordashov (lead image, top left), the mining and metals oligarch, promised President Vladimir Putin (centre) that in future he would stick to investing in Russia. “We did a great deal of work abroad,” he told  the President, “but came to the conclusion that our future lies primarily in Russia, in the Russian market, and our production here is most efficient. We sold the North American division and are focusing almost entirely on our Russian assets.” That was on January 19, 2015.

Mordashov was back in front of Putin at the Kremlin this week, telling him on December 19: “I would also like to ask you not to reduce the level of your cooperation.”  What Mordashov didn’t tell Putin was how much he has invested in Canadian goldmining over the past year, and how much more, according to Russian and Canadian sources,  he is planning to invest next year. That may come to $400 million if a gold prospect in French Guiana, owned by a Canadian mining company, turns out to be El Dorado when a report Mordashov is preparing on the exploration results and gold value is due to be released next March.  (more…)

HANGING ON — OLEG DERIPASKA’S RUSAL FACES BILLION-DOLLAR DROP IN NIGERIA

Young man hanging on to edge of cliff, close-up (focus on fingers)

By John Helmer, Moscow

Oleg Deripaska, control shareholder of Rusal, the Russian state aluminium monopoly, is the leading investor of Russian funds in offshore businesses which have failed. He is also Russia’s largest corporate debtor.  Noone else in the circle of President Vladimir Putin has performed so improvidently and unpatriotically.

When the costs are counted of last month’s Nigerian High Court ruling against Rusal’s ownership of the Aluminium Smelter Company of Nigeria (Alscon), and the ruling expected from the same court in Abuja next week, Rusal is facing a liability and compensation judgement amounting to $2.8 billion. That’s one-third of Rusal’s annual sales revenues; it’s also one-third of Rusal’s gross debt, and almost half its current market capitalization on the Hong Kong Stock Exchange.   Not a single metals analyst or investment banker in Moscow dares to acknowledge the case, or analyse the risk now facing Rusal from the Nigerian courts and its government.  (more…)

FINALE OF THE SOVCOMPLOT – UK JUDGE DISMISSES APPEAL AGAINST $72 MILLION IN PENALTIES AND COSTS; REJECTS RUSSIAN BANK SURETY; ORDERS IMMEDIATE CASH DOWN-PAYMENT

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By John Helmer, Moscow

 It’s the job of the Dorchester doorman to know his hotel guests’ sins; cater to them discreetly; but  keep them under his top-hat, forever secret.

During more than a decade of Sergei Frank’s trips to London to direct High Court litigations against the men he succeeded at Sovcomflot, the Russian state shipping company, he could count on the discretion of the hotel doorman.  After the final ruling came down on Thursday, Frank, chief executive of Sovcomflot (lead image, right), can’t be sure that his humiliation by more than a dozen British judges will not now make him a laughingstock.

In a new 4-page judgement , Frank’s appeal against $72 million in compensation and costs to be paid to Sovcomflot’s ex-shipping partner, Yury Nikitin, has been dismissed, and he has been ordered to start paying immediately, with a down-payment of £1 million.

“There is no doubt,” ruled Sir Stephen Males, the presiding judge, “that, overall, the defendants [Nikitin’s companies] were the successful party. They obtained a judgment for US $59.8 million on the inquiry.” More than that, according to Males, the award of the costs of litigating should be paid to Nikitin, plus interest on further delays the shipping company takes. Not to do so, according to the judgement, “would fail to recognise the overall success which the defendants achieved.” (more…)

GRIGORY AND ALEXANDER KOLOBOV, SIMAN POVARENKIN DISPOSE OF SHOKOLADNITSA, RUSSIA’S LEADING HOT-DRINKS RETAILER

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By John Helmer, Moscow

As war and economic recession eat into their incomes, Russians are making fewer trips to restaurants and cafes. But because the tab is smaller, fast-drinks vendors are taking a larger share of the retail market than fast food. That ought to be good for Shokoladnitsa, Russia’s leading chain of hot-drinks and quick-service cafes. But cost-cutting by the chain has shortened menus and closed cafes, industry sources are now reporting. If Shokoladnitsa’s liabilities are overtaking its assets, the sources warn that Shokoladnitsa may follow the Russian shoe market’s leading retailer, TsentrObuv. In that financial black hole, the question is whether revenues and loan funds for another Russian retail market leader are being diverted to shareholder havens offshore.
(more…)

RUSAL IS FOR SALE AS MIKHAIL PROKHOROV TRIES TO FIND A BUYER — WILL OLEG DERIPASKA LOSE RUSSIAN ALUMINIUM TO VICTOR VEKSELBERG AFTER A DECADE OF VALUE DESTRUCTION?

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By John Helmer, Moscow

In “Any Old Iron”, a popular British music-hall song of a century ago, the cockney comedian Harry Champion made audiences laugh at the vanity of people showing off wealth they don’t have, and at pretentiousness in general. In our century there’s said to be a homosexual come-on in the words of the song, but they still mean the same thing — you aren’t worth what you say you are. This is the punchline: “Any old iron, any old iron, any, any, any old iron? You look neat, talk about a treat… But I wouldn’t give you tuppence for your old watch chain. Old iron, old iron.”

When Mikhail Prokhorov (lead image, right) announced last week that he wants to sell his 17.02% of United Company Rusal, the Russian state aluminium monopoly, he was asking the audience to believe the company controlled by Oleg Deripaska (left) is worth much more than it is. The market didn’t laugh or sing along. It did move more than the usual number of Rusal shares traded daily – 2.5 million – but the price went down by 4%. This means the market isn’t betting on Prokhorov to get his price.

In the Bloomberg version of what had happened, Prokhorov’s Moscow holding “made informal approaches in the past three months to sell its 17 percent stake to two other Rusal partners, Sual, a group led by billionaire Viktor Vekselberg, and Glencore Plc, the people said, asking not be identified because the discussions are private. No official talks were held because the two sides have different views on the value of the stake. While Onexim wants a premium to the current value, the potential buyers aren’t ready to offer it, the people said.”
(more…)

THE STRANGE BUSINESS OF FATHER KHOTIN AND HIS SON – BILLION-DOLLAR CASUALTIES OF RUSSIAN BANK CREDIT, MOSCOW REAL ESTATE VALUE, AND WEST SIBERIAN OILWELLS

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By John Helmer, Moscow

The Khotin family are either the cleverest new men on Russia’s billionaires’ row, strutting out with prime commercial real estate and oilfield assets, which will double or triple in value as soon as the war is over and the Russian market for corporate bonds and share listings revives. Or else the Khotins are walking corpses, whose income has plummeted below the level required to meet the interest instalments on their debts; their oilfields cost more to pump than the oil can be sold for, and their bank is going broke on defaulted loans from related parties – that’s themselves. The advantage of being, as one Moscow newspaper calls them, the “most secretive of Russian businessmen”, is that noone is certain whether the Khotins are alive or dead. In the current war, they may have been, or they are about to become, the costliest of casualties.

In the history of the last war the British have excelled in portraying themselves as secretly cleverer than their allies, the Russians and Americans, as well as their enemies, the Germans. In the archive of grand British intelligence deceptions, none was a more effectively kept secret — so the British claim — than Operation Mincemeat. That’s the one where the corpse of a London suicide was dropped by British submarine on to a Spanish beach, dressed in an officer’s uniform and carrying top-secret plans (lead image from the movie). The objective was to fool the Germans into opposing the 1943 allied Mediterranean invasion in Greece when the landings were really intended for Sicily. The way the British tell the story, the corpse was very persuasive.

In their business career so far, the Khotins are like that. Unrepayable debts, loaned by state banks on the personal say-so of high state officials, secured by future revenues enhanced by administrative favours, would be one reason for making the Khotins’ papers look exceptionally valuable, while keeping their existence secret. There’s another reason. No photograph of either Yury or Alexei Khotin is known to exist. The national photo archives of Tass, RIA-Novosti, Kommersant, Interfax, and Moskovsky Komsomolets all say they have no picture of them.
(more…)

SHORTING BRITISH, AMERICAN AND BALTIC INTELLIGENCE – GOING LONG ON VLADIMIR PUTIN



By John Helmer, Moscow
  @bears_with

Philip Short, a journalist from the BBC, has published a new book which claims to be a biography of Vladimir Putin. It isn’t.

What it is instead is a biography of one hundred and twenty-three westerners — what they claim to know about Russia’s leader  and what for commercial motive, reason of state, or vanity they have told Short in interviews he conducted for his book. They include spies he names without their cover – John Scarlett, Richard Dearlove, Richard Bridge,  Kate Horner, Martin Nicholson, and Pablo Miller from the Secret Intelligence Service (MI6); Hans-Georg Wieck and August Hanning of the Bundesnachrichtendienst (BND); Jean-Francois Clair, Raymond Nart,  and Yves Bonnet  of the Direction de la Surveillance du Territoire (DST); Seppo Tiitinen of the Finnish Security Intelligence Service (SUPO); Mark Kelton, Michael Morell, Peter Clement, Michael Sulick, Michael Morgan, Paul Kolbe, and William Green of the Central Intelligence Agency (CIA); Juri Pihl, head of the Estonian Internal Security Service, and Eerik-Niiles Kross, chief of Estonian intelligence; and several dozen other ambassadors, consuls, advisers, headquarters staff, journalists, and think-tankers.

Not one of the spies was operational in Moscow for the past twenty-one years of Putin’s terms in office.

There is a flash of originality in this book. Not a single source on which Catherine Belton’s book  on Putin relies has been interviewed by Short; in his references to Belton’s claims Short reports they “appear to be untrue”. He reaches the same conclusion about two other books about Putin, Karen Dawisha’s   and Masha Gessen’s.    “Neither book pretends to be a balanced account”, Short says.  Dawisha’s book “is marred by numerous errors of fact”. “All three”, Short warns, “set out the case for the prosecution, and like all prosecutors, the authors select their evidence accordingly.” 

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HOW THE WAR IS BEING WON ON THE BEER FRONT



By John Helmer, Moscow
  @bears_with

There is a right way and a wrong way to understand how the war against the West is being fought on the Russian home front.

The wrong way is to read the Anglo-American media, their stay-behind correspondents in Moscow, and their aggregators in Washington, DC.  

The right way is to take a Russian beer. I mean, take the Russian beer business as an illustration of how the fightback is being fought – and how effectively.

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FIGHTING WORDS – WHAT THE POLES SAY WHEN THEY DARE DO NOTHING

By John Helmer, Moscow
  @bears_with

The Poles have always had a serious problem with their neighbours.  

They have the Germans on their western flank, the Russians on their eastern flank, and inside their borders there used to be the Jews, but now there are the Ukrainians. In September 1939 there were about 3.3 million Polish Jews.    Since February 24 of this year, the Ukrainians in Poland have come to the same number.   

The war which the Polish government and military have been fighting against Russia is proving to be almost worthless politically to Law and Justice (PiS), the ruling party in Warsaw; and also to the Civic Platform (PO) and its allies, the principal opposition coalition (KO).  The PiS was 15 percentage points ahead of the KO in the voter polls a year ago, 35% to 20%; the margin between them now is 11 points, 38% to 27%.  The gains for each are close to the margin for statistical error.

Economically, the war is costing much more in public outlays for the refugees than the value of US and NATO arms flows and related war income. By the time Warsaw pays for its new US weapons, it will owe more than when the war started; and there is still no relief from the European Union funding freeze and penalties.   

What’s to be done, the Poles ask themselves – and who’s to blame when they realise the answer is something between not much and nothing.

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MUTINY IN THE CANADIAN GENERAL STAFF – HOW POLITICAL AMBITION & UKRAINE-RUSSIA WAR AIMS ARE BEING COVERED UP IN OTTAWA



By John Helmer, Moscow
  @bears_with

When it comes to bulldogs fighting under a rug Winston Churchill thought they were Russians. Little did he know about Canadians in Ottawa.

The chief dogs in this fight are Trevor Cadieu and Chrystia Freeland (lead image, right).  Cadieu is a lieutenant general who specialises in planning armoured operations against the Russian army in Europe; Freeland is the deputy prime minister, scion of Galicia in western Ukraine,  and candidate prime minister to replace Justin Trudeau, if she can.

As the Canadian politician most directly connected to the Ukraine by family and property, and the most active advocate of war against Russia, Freeland has promoted Canadian military strategy and plans to wage that war on Ukrainian territory and across the Ukrainian borders for many years.   

In Ottawa also, Cadieu has been director of war plans since mid-2019.  No public record is known of his visits to the Ukraine in the following two years. His appointment as chief of Canada’s defence staff was announced in August 2021, then withdrawn in September following the start of an official investigation of sexual assault charges dating from his military cadet days. When the  investigation ended in an official indictment, Cadieu resigned. By April he was in the Ukraine again, working directly on coordinating the new supplies of tanks, armoured vehicles, howitzers,  and other artillery from NATO member states to the Ukraine.

Speaking through an Ottawa defence reporter named David Pugliese, Cadieu declared his innocence of the criminal charges and promised to return from the Ukraine to answer them. He then disappeared as the Russian forces intensified their targeting of Ukrainian and NATO general staff as they prepared operations to save Odessa in the southeast, and Lvov in the west.   

On Friday Pugliese reported Cadieu had surrendered to Canadian police and been released to appear in a local court in August. In the meantime Pugliese has reported an active online debate between supporters and critics of the sexual misconduct charges; these include a comment in support of Cadieu from retired Brigadier-General James Cox claiming the charges against him amount to “sedition to undermine national leadership;”  by that he meant mutiny by the politicians against the generals.

As deputy prime minister with supervision over most government ministers and war plans for the Ukraine, Freeland has claimed to have known nothing of the sexual misconduct which was identified a year ago against General Jonathan Vance, chief of the defence staff between 2015 and 2021. At the time Freeland declared: “No woman serving Canada should be sexually harassed while doing that, and I’m happy right now today to apologize to any woman who was sexually harassed while serving her country;”   by that she meant to condemn no one by name of anything.

Freeland is missing from the list of high officials contacted by former judge Louise Arbour  for her investigation of sexual violence in the Canadian military which began in May 2021 and concluded with the release of her 420-page report last month.    Arbour is known in Europe as the NATO prosecutor of Yugoslav and Serbian President Slobodan Milosevic.

Arbour concluded her report on the Canadian Armed Forces (CAF): “Members of Indigenous and black communities, and other visible minorities and equity-seeking groups, have been largely absent, clearly not welcome. For years, women were simply shut out. When finally allowed to serve, women were made to feel they did not belong. They were denied opportunities to compete fairly and to thrive. They were harassed, humiliated, abused and assaulted, and, appallingly, many continue to be targeted today… One of the dangers of the model under which the CAF continues to operate is the high likelihood that some of its members are more at risk of harm, on a day to day basis, from their comrades than from the enemy.” By enemy, Arbour  meant what Cadieu and Freeland mean.  

There has been no disclosure, no indictment, no apology for the Canadian military role in the Ukraine, training and arming Ukrainians committed to reviving Nazi doctrine from World War II.  Nor for the war crimes now alleged by eastern Ukrainians  to have been committed by western Ukrainians during the civil war which began in 2014. According to Arbour, “the very success of CAF operations, which I am not in a position to assess, reinforces its view that it is unique, and that CAF can do everything without the assistance of outsiders, as it always has.” By not to assess, Arbour meant not to doubt nor criticize.  

A Canadian with NATO warfighting experience comments: “The contradiction here is that the officer corps, heavily committed to the anti-Russia track that cuts across Canadian party lines, is heavily politicized and infected by the neo-Confederate faction in the US. They don’t appreciate what they see as [Prime Minister Justin] Trudeau’s ‘communism’. They believe the charges against Cadieu are an expression of it.”

“The truth, that no one, including Pugliese and other reporters will admit, is that the Canadian military, not to mention large swathes of law enforcement, is not reliable in terms of defending the Canadian state if the ruling faction pursues policies contrary to the officers’ wishes.”

There is no mutiny, at least not against the war against Russia, responds a veteran Canadian politician. “I have seen no indication that senior officers in the Canadian military oppose Canada’s hyper-aggressive approach to the Ukraine war. My impression from day one has been that Canada’s military is as belligerent toward Russia as any in NATO.”

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LITHUANIA’S STEP TOO FAR — BLOCKADE OF KALININGRAD DRAWS NO SUPPORT FROM US, UK, EU, NATO, AS RUSSIA PREPARES “PRACTICAL STEPS”, “NO DIPLOMACY”



By John Helmer, Moscow
  @bears_with

The action the Lithuanian government implemented over the weekend to stop Russian trains carrying sanctioned cargos into Kaliningrad is regarded in Moscow as a long anticipated move, prompted among Lithuanian officials by the British government. The initial Lithuanian embargo action has been followed by a second one this week extending the blockade to trucks and road transport.   Neither action has been publicly announced by the Lithuanian government.

The first news came from Anton Alikhanov, the governor of the Russian oblast of Kaliningrad, following a  notice sent to him by Lithuanian officials. That notice has not been published.

Lithuanian president Gitanas Nauseda (lead image) has said nothing.  

Lithuanian Prime Minister  Ingrida Simonyte announced through the British Broadcasting Corporation that the blockade was not a blockade because only some cargoes were halted, and because “Lithuania is complying with the sanctions imposed by the European Union on Russia for its aggression and war against Ukraine ” . She also told the British state radio “it was important not to overreact”.  

She tweeted: “Any talk of a blockade of Kaliningrad is a lie. Lithuania is complying with the sanctions imposed by the EU on Russia for its aggression and war against Ukraine.  The sanctions were agreed by all the EU member states on March 15…. Passenger transit is also taking place, under a special agreement by the EU, RU, & LT. Steel and ferrous metal products account for only around 1% of the total rail freight to Kaliningrad via LT.”  

In the three days which have followed the Lithuanian action, the US and British Governments, the European Union (EU),  and the North Atlantic Treaty Organization (NATO) have not supported the Lithuanian blockade.

The Russian Security Council met on Wednesday morning, but issued no statement on Lithuania.  The Secretary of the Council, Nikolai Patrushev, who was in Kaliningrad on Tuesday, had announced there that the “consequences will have a serious negative impact on the population of Lithuania.”

Yesterday, at the same time as President Vladimir Putin was chairing the Security Council meeting, the Russian Foreign Ministry announced it is delaying “concrete measures” in reaction:  “The measures will not be diplomatic, but practical, they are now being worked out in an interdepartmental format, We are not talking about this not because we are hiding something, but because the process of their coordination and elaboration is underway. I would like to emphasize once again (the third time for today’s briefing): we have told the European Union and Lithuania about the need to change the steps they have taken. Perhaps something from that side will be changed, and, accordingly, our reaction will be different.”

Here is a compilation of the official documents.

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GERMAN NEUTRALITY WAS MORE IMPORTANT THAN NATO EXPANSION – A NEW HISTORY BOOK EXPLAINS WHY GORBACHEV GAVE IT AWAY FOR NOTHING

By John Helmer, Moscow
  @bears_with

In the rest of the world it is known as the cultural cringe. In Russia the wish to be loved by Americans is known as liberal reform.

In the very first paragraph of a new book called “Collapse: the Fall of the Soviet Union”, the author, Vladislav Zubok – the name in Russian means a small tooth — reveals that on the morning of August 19, 1991, when the first coup was attempted against Mikhail Gorbachev, then President of the Soviet Union, Zubok was flying to the US by arrangement with Strobe Talbott,   Moscow correspondent for Time and soon to be the Clinton Administration’s principal Russia expert. At the time Zubok describes himself as a “Moscow-based academic intellectual”. By this, he means he was no simple worker with a Moscow university degree. In Soviet class terms, he insists the reader recognise him to be an “intellectual”. That then was upper class, and Zubok wants the reader to know the difference between the Russian upper and lower classes —  immediately, on the nineteenth line of his very first page.

Zubok also wants the reader to know he had been hired with money from “the prestigious Amherst College in Massachusetts”. What exactly was prestigious about Amherst, or Massachusetts for that matter — and to whom? And why does Zubok think that in a history of Russian politics between 1983 and 1991, such a remote place, with such an adjectival tag, was worth the mention?

The answer, like the other revelations of the first paragraph, reveals what this book turns out to be. It’s an exercise in American-style reconstruction of what a small group of Russians for hire were keen to give their masters, about the circumstances of the years leading up to Boris Yeltsin’s replacement of Mikhail Gorbachev, and Russia of the Soviet Union. But this isn’t Russian history. It’s the history of Russians with cultural cringe – the desire to be loved by Americans, and to tell them what they wanted, paid for, insisted on hearing then, and demand  now.  

The payoff, reported on the dust jacket of the book, comes from Talbott, Zubok’s original employer. He is quoted as saying: “This is a deeply researched indictment of Mikhail Gorbachev’s timidity and mercurial policies which backfired.” “Instead,” Talbott adds, “Russia at the turn of the 21st century was ripe for the rise of Putin.” Zubok was ripe for what Talbott meant. “In 2008,” according to Zubok’s history, Putin “used military force against Georgia, and in 2014 he annexed Crimea and waged an undeclared war on Ukraine in Donbass.”  The blame for that, Zubok means, was Gorbachev’s mistakes. Without them, “had the Kremlin ruler made different choices… the Soviet Union could have gradually made its way into the world economy by a process of trial and error, with a nomenklatura-style state capitalism, and certainly with its institutions of power preserved.”

As for the Russian cultural cringe, Zubok is sure it was one of Gorbachev’s biggest mistakes.  During his well-known trips abroad in the 1980s, Gorbachev took with him, Zubok records, “a “huge entourage…of journalists, social scientists, writers, theatre directors, filmmakers and other cultural figures. Most of them shared [Gorbachev’s] fascination, admiration, and envy for things Western.”

Zubok has written a book to prove he doesn’t suffer this cringe. The work proves the opposite. This is the problem with cringers. They are too bent out of shape to recognize the shape they are in.

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HER BRITANNIC MAJESTY’S GOVERNMENT BANS RUSSIANS FROM BUYING JUST ABOUT EVERYTHING*

By John Helmer, Moscow
  @bears_with

On March 15 the British Government announced it is imposing a ban on exports to Russia of “high-end luxury goods”.

According to the official press release, “the measures will cause maximum harm to Putin’s war machine while minimising the impact on UK businesses as G7 leaders unite to unleash a fresh wave of economic sanctions on Moscow. The export ban will come into force shortly and will make sure oligarchs and other members of the elite, who have grown rich under President Putin’s reign and support his illegal invasion, are deprived of access to luxury goods.”

Exactly what counts as “luxury goods” was loosely defined in the government’s statement as “luxury vehicles, high-end fashion and works of art” and “antiques”.

But the regulation issued to enforce the policy is much more comprehensive.  Section 11 of this regulation identifies “pearls, precious and semi-precious stones, articles of pearls, jewellery, gold or silversmith articles”. Section 21 covers “Works of art, collectors’ pieces and antiques”; that’s  the kybosh for oligarch luxury —  the Russia warfighters in London say they believe — to “cause maximum harm to Putin’s war machine”.

The official regulation defines this to cover goods higher in price than £250 (before VAT). They have been listed to include horses, caviar, wrist watches, xylophones, vacuum cleaners, ski boots, saddles, perfumes, and pottery. Russian women buying lingerie, Russian men buying pyjamas, Russian children buying rollerskates, and Russian housekeepers buying toasters have all been hit with “maximum harm”. Russian spies have been banned from buying British-made false beards and wigs.

Compression stockings for varicose veins will be stripped off Russian legs at the airport, and confiscated under the new rule.  Bathing suits, however, if worn instead of underwear, are exempted from the ban.

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ANSCHLUSS, AGAIN — ANTICIPATING POLAND’S STRATEGY IN RUSSIA’S INTELLIGENCE ASSESSMENT

By John Helmer, Moscow
  @bears_with

On June 13, for the first time since the Russian military operation began in the Ukraine, a detailed Russian intelligence assessment has been published in Moscow of Polish strategy for the future of Ukraine. This follows several weeks of brief statements by Russian security and intelligence officials claiming the government in Warsaw is aiming at an anschluss or  union  with the “eastern borderlands” known in Poland as Kresy Wschodnie, and in the Ukraine as Halychyna; that’s to say, Galicia.  

These Russian claims have been dismissed as propaganda by the Poles.  Polish strategy, according to Warsaw sources, is to preserve the Zelensky regime in Kiev and the unified Ukrainian military command — and not to acknowledge the possibility of their defeat by the Russian army east of the Dnieper River.

In this week’s discussion between Vlad Shlepchenko, a military analyst for Tsargrad in Moscow, and Vladimir Kozin, a leading academic attached to the Russian intelligence think tank, the Russian Institute for Strategic Studies, they consider the scope of the strategic problem which they think the Poles, and behind them the US and NATO, will continue to pose, after the objectives of Phase-1 and Phase-2 of the Russian military operation in the Ukraine have been completed.  

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THE POLISH ADDITIVE IN THE UKRAINE WAR — TAKE OUT WASHINGTON PORK & BRUSSELS SPICE, WHAT’S THE DIFFERENCE BETWEEN CRACOW AND LVOV SAUSAGE?



By John Helmer, Moscow
  @bears_with

The Cossacks are known for many things, but not for being Roman Catholics like the Galicians of western Ukraine around Lvov, or like the Poles around Cracow.

Originally, the Cossacks swore off eating horsemeat, veal, hare, and pork. Pork is the principal meat of Lvivska (lead image, right) and Krakowska (left), the traditional sausages of Lvov and Cracow. They differ from one another in the spicing – Lvov with onion, marjoram, coriander and bay leaves; Cracow with nutmeg and sugar. In ingredients, the original Cossack sausages were closer to the Jewish ones.

In the war which is now extending from Europe to the world, taste in sausage shouldn’t be confused with race hatred. On May 22, when Andrzej Duda, the President of Poland, declaimed in front of President Vladimir Zelensky at the Verkhovna Rada in Kiev, that “you are – as your national anthem has it – of Cossack stock! You are magnificent!” Duda was making a racial observation with a profound mistake – and not only about sausages.  

The Cossacks of the Ukraine came from the lands between the Dnieper and the Don Rivers – that’s between 700 and 1,400 kilometres from Galicia and a journey of nine to twenty hours by motor, days by horse.  The Cossacks were Slavs and they were Orthodox Christians. By their ethnic origin, language, culture, and religion, they had little in common with the people who lived to the west of the Dnieper; that’s between Kiev, Lvov and the Polish border today. The Cossacks didn’t start eating pork sausage until after they gave up the nomadic life, got off their horses, and settled to farming.

When Duda told the Kiev deputies “I trust the goodness, the friendships made between millions of Poles and Ukrainians will mean we will be good neighbours forever now. This is a great historic opportunity and the great historic break–through”, he was getting closer to the truth of the history. But that is the history of  several hundred years of wars and race hatred between the Galicians and the Poles, and between the Galicians and Poles together against the Russian Slavs. It’s also a story Duda, his political party, and the Polish opposition backed by Mark Brzezinski, the US Ambassador in Warsaw,  recognize as a cause of war inside Poland, as well as outside.

The “historic break-through” which Duda declared in Kiev is only 81 years old, from the time of Duda’s grandfather.*  That was in 1941, when the German Wehrmacht incorporated Galicia into the General Government of southern Poland (Generalne Gubernatorstwo in Polish). Four years later, as the Germans retreated westwards to Berlin, it became the covert strategy of the US Army and then the policy of successive US governments for the extension eastwards of the North Atlantic Treaty (NATO) alliance; since 1945 that policy has also included regime change in Moscow, and the breakup, first of the Soviet Union, and then of the Russian Federation. That was also the announced strategy of Ambassador Brzezinski’s father, Zbigniew Brzezinski, the National Security Advisor of the Carter Administration between 1977 and 1981.   

Duda’s speech of May 22 was a Polish call to the Galicians to put aside the race hatred between themselves, and revive the race hatred which the two Catholic peoples, plus the Germans, have shown towards the Russians – also the Jews from whom the Zelensky family comes.

“How can I speak now,” Duda began his address, “when I am almost overcome with emotion”. Duda’s emotion was also calculated for the Polish audience who will vote in the next national election in just twelve months’ time.

Duda’s call to race war against the Russians was also an attempt to secure Poland against its more recent enemy Germany, and neutralize the US government’s attempt to topple the government in Warsaw. For Duda to manage this combination and hold on to power requires the appearance of a much closer Polish alliance with the Kiev regime than the Ukrainian military commanders and the Galician nationalists are contemplating at the moment, as they are forced into retreat westwards, like the Wehrmacht.  Their taste in sausage isn’t Duda’s, or Brzezinski’s, President Zelensky’s or the Cossacks for that matter.

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THE US WAR IN EUROPE ISN’T HOT ENOUGH – DROPPING THE CLIMATE BOMB ON RUSSIA

By John Helmer, Moscow
  @bears_with

There ought to be a law, or at least a sanction –  tenure cancelled, travel visa blocked – for American experts on Russia who claim to know from their reading of other American experts on Russia why Russia does things, and what will happen next.

Thane Gustafson, a Georgetown University professor publishing at the Harvard University Press, claimed very recently “it’s not too hard to reconstruct at this point what was likely going through Putin’s mind as he gave the order to attack…Putin was not nuts, not deranged, not isolated, etcetera. It was all a reasonable bet—by his strange lights—except that every one of the premises turned out to be wrong.”  Gustafson is certain he knows this; how he doesn’t say.  

But then Gustafson concedes: “All the cards are up in the air, and who knows how they will come down…I don’t know how this ends.”

There’s modest uncertainty for you — except that Gustafson is kidding. He wants you to know, he also says, that Russia is now a fascist state, and there’s really only one thing left he doesn’t know: because it’s such an effective fascist state, “the fact is that because of the regime’s control of information, we have very little idea of how Russians actually feel about the war, and how they will react to Putin’s apparent defeat.”

Gustafson didn’t notice he was squatting on the horns of a dilemma. If Russian regime control of information is so total(itarian), Gustafson’s information must come from the other side – American, Canadian, British, NATO headquarters in Brussels. The technical terms which professors usually apply to information emanating from one side of a two-sided war are misinformation, disinformation, propaganda, active measures, fake news, lies.  Between these things and the information Gustafson says he’s sure of, he has trolled himself.

So, to repeat the question, what if Russians actually support the war and blame the US for starting it?  What if they are as certain of this as Gustafson is certain Putin started it?

And what if the war ends in the US and NATO alliance retreat to Lvov; after which the Polish government will notify NATO HQ it is reviving its treaty claim to the Galician territory of the Ukraine; the chancellery in Berlin will then inform Brussels it requires the return of the ancient Danzig Corridor and Breslau, Polish territories  currently called Gdansk, Wroclaw,  and the  Ziemie Odzyskane;  and the Hungarian government will follow suit with the announcement of the recovery of historical Kárpátalja (Transcarpathia), the Zarkarpatska oblast of the Ukraine?

These were the spoils of the World War II settlement between the US and the Soviet Union in 1945-46. The territorial reversion claims aren’t new. What is new is that the US and the NATO alliance, plus the Galician regime still ruling between Kiev and Lvov, also in Ottawa, have aimed to change the terms of the post-war settlement by continuing the war eastward on to the territory of Russia itself, all the way to regime change in Moscow.

That is what Russia says it is fighting now to defend itself against. As Russian officials have been hinting in recent days, the foreign and defence ministries and the intelligence services are currently discussing in the Kremlin Security Council whether Russia’s long-term security on its western front may be best served by terms of a Ukrainian settlement in which the German, Polish, and Hungarian territorial claims are recognised.   

So, if these are indeed the cards that are up in the air, as the professor in Washington, DC, acknowledges, he isn’t the only one who doesn’t know how they will come down.

In the meantime he  and the Harvard printers want their new book to be a weapon in this war, targeted directly at President Vladimir Putin in the Kremlin. But what if the weapon misfires and they lose this war? Will Gustafson admit his ignorance or his mistake or his deception? Should he resign his professorship? Should Harvard pulp the new book? Or is the state in which Gustafson lives and lectures such an effective fascist state, losing the war against Russia to Germany, Poland and Hungary, minus the Ukraine, plus Russia, won’t matter to US officials any more than losing Afghanistan, Iraq, Libya, and Syria?

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