Sponsor of mercenary army boasted of go ahead from Moscow for attack on U.S. troops in Syria

Who was in command in the first direct military collision between Russians and the U.S. since the Vietnam war

Yevgeny Prigozhin seen after the sixth meeting of the High-Level Russian-Turkish Cooperation Council. Mikhail Metzel/TASS

1. Sponsor of mercenary army boasted of go ahead  from Moscow for attack on U.S. troops in Syria

What happened

Evgeny Prigozhin, an entrepreneur in control of a Russian mercenary force in Syria, said he had permission from the Russian government for an attack that left dozens of Russian military contractors dead or wounded on February 7, according to U.S. intelligence reports citing his intercepted communications obtained by The Washington Post.

• The clash in Deir ez-Zor was the first direct military confrontation between Russians and U.S. troops since the end of the Vietnam war, and the biggest direct challenge to the U.S. military presence in eastern Syria, according to the Post.
• Russian and American authorities say that the Russian military command in Syria wasn’t  in control of the attack.

What we know

Little, as information on Russian private military activities in Syria is scarce.

• Dmitry Sablin, member of the State Duma and coordinator of the Russia-Syria parliamentary friendship group, said he doubted the report, as Prigozhin should have discussed the military operations with the Syrian Ministry of Defense, rather than with civilian members of Assad’s government.
• A commander at another Russian private military company told The Bell that if Prigozhin really talked with his Syrian counterparts over an unsecured communication line, it should now raise questions of his competency.

Why the world should care

It is evident that the incident has already raised tensions between Russia and the U.S. to new heights. With any new evidence of the involvement of the Russian official military command in Syria in the attack, tensions will rise further.

2. Russian Billionaires Begin Their First War in Five Years

What happened

The billionaires from the Russian 1990s – Vladimir Potanin (Forbes list #8 in Russia and #77 globally) and Oleg Deripaska  (#23 and #317) are facing off against each other in a fight for control of Russia’s largest mining company, Norilsk Nickel, with a market cap of $30 billion.

• Potanin holds 31.02% of the company’s shares, Deripaska — 27.8%. These shareholdings were set in 2012 after a conflict lasting several years. The conflict was resolved by attracting an investment from another billionaire, Roman Abramovich. He became the arbitrator between the two others  in the event of a conflict.
• The agreement assumed that the partners couldn’t buy each other’s stakes until December 10, 2017 — and as soon as the deadline passed, Potanin offered to buy Abramovich’s stake from him. Deripaska responded by filing a lawsuit against Potanin in London.
• The new arbitrator between Potanin and Deripaska could be Valentin Yumashev, the son-in-law of former Russian President Boris Yeltsin, who served as head of Yeltsin’s administration in the 1990s. Deripaska was married until 2017 to Yumashev’s daughter, Polina. Yumashev hasn’t held an official post in 20 years, but he is still influential.  Russian Forbes wrote that Yumashev himself originally brought Abramovich into Norilsk Nickel.
• Potanin’s representatives argue that Deripaska’s Rusal may not be able to pay for the lawsuit in the event that the company falls under new American sanctions under new legislation.

Why the world should care

Norilsk Nickel is one of the largest mining companies in the world. It is still held by private shareholders who gained control of Russia’s natural resources at Boris Yeltsin’s orders in the mid-1990s. The new feud between the oligarchs, with U.S. sanctions as the latest weapon, shows that business practices in Russia have not changed much.

Ever since Boris Berezovsky’s lawsuit against Abramovich, court battles between Russian oligarchs in the West have been an important source of information, shedding light on the realities of business in Russia. From the court documents in the case of Deripaska vs. Potanin, it’s certain that there will be more details to come.

3. $5 billion returns to Russia from offshore accounts due to fears of potential U.S. sanctions.

What happened

Russian businessmen fear new U.S. sanctions, according to Raiffeisenbank estimates. The Austrian bank is one of the largest foreign banks operating in Russia. In January, business owners transferred $5 billion from abroad to Russian banks due to fears that their accounts in Europe may be frozen.

• Private banking departments of other major Russian banks also noticed an unusual inflow of funds from abroad to Russia.  Sberbank spoke of “hundreds of millions of dollars” from Switzerland, Austria and the United Kingdom, while Alfa Bank noticed inflows of “sanctions money” from abroad in the amount of RUB 11 billion ($200 million).

The return of money to Russia is likely to continue, for the following reasons:

• Although the “Kremlin List” does not formally introduce sanctions, individuals on the list have already faced problems while entering into international transactions and have been subjected to additional scrutiny by Western banks.
• The Bell’s oligarch survey indicated that just after the Kremlin List was published, those individuals on the list were certain that they would be subject to new sanctions, and they expect difficulties in applying for travel visas and accessing financing from Western banks.
• On the 1st of March, a law will go into effect providing amnesty for returning capital, which will allow undeclared revenues to return to Russia until March 1, 2019 without risk of fines or sanctions for tax evasion charges or illegal currency conversion.
• In addition, beginning in 2018, the Russian tax service will launch an automatic exchange of information with 71 countries, including many countries which are popular with Russians as offshore locations.  Hiding money abroad will only become more difficult.

Why the world should care

Sanctions have forced Russian money to leave the West, but $5 billion to date is actually not that much.  The U.S. National Bureau of Economic Research (NBER) last year estimated that Russians to have transferred approximately $1 trillion in total abroad from Russia.

4. Latvia accuses Russia of provoking a banking crisis in the country

What happened

Latvia, a neighbor of Russia, experienced a banking crisis this week.  The head of Latvia’s central bank was arrested under suspicion of corruption, and one of the country’s major banks is on the verge of collapse after the U.S. accused it of aiding North Korea in getting around sanctions and of laundering Russian money. The Latvian government believes that Russia is behind the scandal, with the aim of influencing parliamentary elections which will take place in Latvia in October 2018.

• The head of Latvia’s central bank and member of the ECB’s board of directors, Ilmar Rimshevich, was arrested by members of the local anti-corruption office, but was released on bail two days later.
• The accusations against him have not been made public, but in December 2017, Russian banker Grigory Guselnikov, the owner of the Latvian Norvik Bank, accused Rimshevich of accepting bribes and attempting to launder $100 million of Russian funds.
• In the heat of the scandal, the media published a photo of Rimshevich on a hunting outing in Russia with the director of a Russian defense institute which is currently under U.S. sanctions. After the publication, the Latvian ministry of defense accused Russia of spreading the photo and articles accusing Rimshevich via fake news websites, comparing the situation to the information campaign waged during elections in the U.S., France and Germany.
• Historically, Russia has had very bad relations with Latvia. Ethnic Russians make up 27% of Latvia’s population, having moved there following the USSR’s occupation in 1940. At the same time, Latvian banks have traditionally been one of the main hubs for laundering Russian money and transferring it further West.

Why the world should care

The Latvian banking scandal illustrates how closely Russia is tied to its nearest EU-member country neighbors through not entirely legal business connections.  It will be interesting to observe what happens in Latvia’s elections, which will take place one month before the midterm elections in the U.S., in which Russia is also likely to be accused of meddling.

5. The head of the Duma’s international committee is accused of sexually harassing journalists

What happened

This appears to be Russia’s first real sexual harassment scandal.  Three female journalists (their names have not been disclosed) have made accusations against Duma deputy and head of the Duma’s international affairs committee, Leonid Slutsky. The consequences of the scandal are not at all like in America: so far, everything is fine with Slutsky, and the journalists who reported the accusations may now lose their journalist accreditations for the Duma, according to the independent television channel TV Rain.

• According to one of the journalists, Slutsky harassed her in 2017 in his office in the Duma, when she was interviewing him regarding the international agenda. “He put the inside of his palm on my pubic area and moved his hand upwards.  After that, I didn’t have any further contact with him and I avoided him,” the journalist recounted.
• Another journalist told TV Rain that she didn’t want to publicize the incidents of harassment because she feared losing her right to work in the Duma.
• Slutsky himself called the accusations “a lie”, and comparisons of him to Harvey Weinstein “flattering”.  The vice speaker of the Duma from the LDPR party (a very right wing movement, totally under Kremlin control) demanded that TV Rain be stripped of its accreditation in the Russian Duma.  LDPR party leader, Vladimir Zhirinovsky, suggested that Slutsky might have been trying to draw the female journalists’ attention to him as a “newsmaker”.

Why the world should care

The continued fallout from the scandal will show if accusations of sexual harassment in modern Russia can actually damage one’s political career, as would certainly be the case in Europe or the U.S.

Peter Mironenko

This newsletter is made with the support of the Investigative Reporting Program at UC Berkeley.